Planning for After Life · Guide
Illinois Death Tax: How the Illinois Estate Tax Works
Illinois does not have an inheritance tax, but it does have an estate tax, often called the Illinois death tax. It applies to estates worth more than $4 million, which is a much lower line than the federal estate tax. This guide explains how the Illinois death tax works, who it reaches, and how families plan for it.
The Short Answer
Illinois taxes the estate itself, not the people who inherit from it, and only when the estate is worth more than $4 million. Below that line, no Illinois estate tax is owed. Above it, the tax can be significant, and a married couple’s plan matters more because Illinois does not let a surviving spouse use the first spouse’s unused exemption.
Does Illinois Have an Estate Tax?
Yes. Illinois taxes the value of what a person owns when they die, if the total is large enough. The tax is administered by the Illinois Attorney General.
The threshold is $4 million: Estates at or below that amount owe no Illinois estate tax.
A return is required above the threshold: If the gross estate, plus certain taxable gifts, is more than $4 million, the executor files Illinois Form 700 with the Attorney General.
The deadline is nine months after death: Extensions are available, and the Attorney General recognizes federal extensions.
Filing doesn’t always mean paying: Deductions can bring the taxable amount below the threshold, in which case no tax is due.
Does Illinois Have an Inheritance Tax?
No. Illinois has an estate tax but no inheritance tax. The two are different:
An estate tax is charged on the estate before it is divided, and the estate pays it.
An inheritance tax is charged to the people who inherit, and it is set by each state. Illinois does not have one.
Some other states do have an inheritance tax, so if you own property in another state, ask whether that state’s rules apply to it.
How the Illinois Death Tax Works
The $4 million is a threshold, not a credit. The Attorney General describes the Illinois exclusion amount as a taxable threshold and not a credit against tax. In plain terms, an estate at or below $4 million owes nothing, but an estate above it is taxed on a sliding scale, and the first dollars above the line can be taxed heavily. The Attorney General offers an online calculator to estimate the tax.
What counts toward the $4 million. Your gross estate generally includes your home and other real estate, bank and investment accounts, retirement accounts, business interests, and life insurance if you own the policy.
There is no portability between spouses. Under the federal system, a surviving spouse can use a deceased spouse’s unused exemption. Illinois does not allow that, so each spouse has their own $4 million exemption, and an unused exemption is lost.
Illinois Estate Tax vs Federal Estate Tax
Exemption
$4 million
Unused exemption passes to a spouse
No
Who collects it
Illinois Attorney General (Form 700)
Return due
Nine months after death
Top rate
Graduated, up to 16%
An estate can owe Illinois estate tax and no federal estate tax at all, because the Illinois line is so much lower. That is the gap many families overlook.
Who Should Be Thinking About the Illinois Death Tax?
Anyone whose total estate could approach or pass $4 million should look at it. That includes:
Homeowners whose home, retirement accounts, and investments add up to a larger total than they expect.
Married couples, because the first spouse’s $4 million can go unused if everything passes to the survivor.
Business owners, whose business interests count toward the total.
People who own life insurance, because a policy you own is part of your estate.
An example. Suppose a married couple has a combined estate of $6 million. With no planning, if the first spouse leaves everything to the survivor, the first spouse’s $4 million Illinois exemption goes unused, and the survivor’s estate of $6 million is above the line. With planning, both exemptions can be used, and the couple’s $6 million can fit within them.
How to Avoid Illinois Estate Tax
No plan removes the tax entirely, but families can reduce it, delay it, or plan around it. The right tools depend on your family, your assets, and your goals. Common approaches include:
Using both spouses’ exemptions
A couple can set up their plan, often with a trust, so the first spouse’s $4 million exemption is used instead of lost.
Leaving property to a spouse
Property passing to a surviving spouse generally isn’t taxed at the first death, which delays the tax until the second.
Lifetime gifts
Illinois has no gift tax, and giving property away during life can lower the size of an estate. Illinois counts certain taxable gifts in its calculation, so the details matter.
An irrevocable life insurance trust
Holding a policy in the right kind of trust can keep its proceeds out of your taxable estate.
Charitable giving
Gifts to charity can reduce the taxable estate.
A revocable living trust helps with probate and privacy, but it does not lower estate tax on its own. Our trust attorney in Chicago page explains how a trust works, and our guide on how to avoid probate in Illinois covers the court process, which is a separate question from the tax.
How We Help
Estates that could face the Illinois death tax often need more than a basic plan. Our Elevated Plan covers advanced structuring for larger or more complex estates and starts at $8,500, and your attorney confirms what your plan includes and your price before any work begins. This work is part of what we do as an estate planning attorney in Chicago.
Questions About the Illinois Estate Tax
When is the Illinois estate tax due?
The Illinois estate tax is due nine months after the date of death. The executor files Form 700 with the Illinois Attorney General, and extensions are available if the estate needs more time.
Does the Illinois estate tax apply to what I leave my spouse?
Property that passes to a surviving spouse generally isn’t taxed at the first death, which postpones the tax until the second death. Because Illinois has no portability, the first spouse’s exemption can be lost, which is why married couples plan for it.
Does life insurance count toward the $4 million?
Yes, if you own the policy when you die, the proceeds are generally counted in your gross estate. A policy held in an irrevocable life insurance trust may be treated differently, so ask your attorney how yours is set up.
What counts toward the $4 million Illinois limit?
Your gross estate counts: your home and other real estate, bank and investment accounts, retirement accounts, business interests, and life insurance you own. Debts and certain deductions can lower the taxable amount.
Could the Illinois estate tax rules change?
They could. The exemption has been $4 million for years, and lawmakers have considered changes, so the amount should be checked on the Illinois Attorney General’s website before you rely on it. We confirm the current figures when we review your plan.
Talk It Through
One conversation can show whether the Illinois death tax is a concern for your family and what it would take to plan for it.
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