Illinois has its own estate tax, which applies only to estates with a value of more than $4 million. The Illinois tax is separate from the federal estate tax, which under current law affects only estates larger than $5.25 million. So estates that aren’t large enough to owe federal estate tax may still owe an estate tax to Illinois.
Which Estates Must File
The amount that you can leave free of Illinois estate tax has been changing. Here are the numbers:
- Deaths in 2011: $2 million
- Deaths in 2012: $3.5 million
- Deaths in 2013: $4 million
So for deaths in 2013, estates with an estimated gross value of more than $4 million must file an estate tax return. That doesn’t mean the estate will actually owe tax, because tax deductions may reduce the amount of the taxable estate and reduce or eliminate any tax. For example, all assets left to a surviving spouse or civil union partner are not subject to Illinois estate tax. But if the estate is large enough, a return must still be filed.
The estates of both Illinois residents and nonresidents may owe estate tax. The estate of a nonresident may owe Illinois estate tax if the person owned real estate or other property physically present in the state.
It’s the executor’s job to add up the value of the assets you leave behind and determine whether or not your estate must file an Illinois estate tax return. The gross estate includes all your assets:
- All kinds of bank accounts and certificates of deposit
- Stocks, bonds, and investment accounts
- Real estate
- Vehicles and other personal property
- Life insurance proceeds from policies you owned
- Retirement account funds
- Interests you own in a business (sole proprietorship, limited liability company, or small corporation)
It doesn’t matter whether or not the assets go through probate. So, for example, if you hold your house in a revocable living trust to avoid probate, it’s still part of your estate for tax purposes.
Estate Tax Returns
If the estate may owe Illinois estate tax, your executor will have to file both an Illinois estate tax return and a federal estate tax return (with schedules, appraisals and other attachments) with the state—even if the federal form doesn’t have to be filed with the IRS. They're due nine months after death. Preparing the returns is a job for an experienced lawyer or CPA, who will probably charge several thousand dollars for the work. The fee can be paid from estate funds.
The Illinois Attorney General provides an online calculator so that the executor can compute the amount of tax due.