Death and taxes. Many people in Godfrey not only view those as the two basic inevitabilities in life but also two things that are inextricably linked; when you die, you (or more appropriately, your estate) will have to pay taxes on the assets that you earned during your life. This, of course, comes at the expense of your potential beneficiaries.
Such is the assumption that many have when they come to see us here at Farrell, Hamilton & Julian, P.C. However, with the right amount of planning, you may be able to limit your tax liability.
Understanding estate tax portability
There are two forms of estate taxes you need to plan for: federal and state. The federal government has established an estate tax threshold (which, according to the Internal Revenue Service, is $11.56 million for 2020). If the total taxable value of your estate comes in under that amount, it is not subject to tax. The federal government also allows for estate tax portability, meaning that you and your spouse can combine your exemption amounts. If you leave them your entire estate, then that takes advantage of the unlimited marital deduction (leaving your estate tax exemption untouched). Your spouse can then combine your $11.56 million exemption with theirs, protecting $23.16 million from federal taxes.
Illinois’ estate tax threshold
Illinois is one of the few states to still impose its own estate tax. The state’s threshold is $4 million, and (unlike at the federal level) does not permit portability. The state utilizes a graduated estate tax rate (it goes up per the amount subject to tax) up to 16%.
You can learn more about estate tax laws by continuing to explore our site.
