Historically - "Coupling"
Under current law, Illinois residents must pay both a federal estate tax at a maximum rate of 45 percent, and a separate Illinois estate tax at a maximum rate of 16 percent. The maximum federal and state-level taxes combined are approximately 54 percent (after taking into consideration the federal deduction received for any Illinois estate taxes paid). Traditionally, not much attention was paid to the Illinois estate tax because any estate tax paid to the state of Illinois was subtracted from any federal estate tax due. In addition, Illinois estate tax exemptions were “coupled” with federal estate tax exemptions. For example, in 2008 when the federal estate tax exemption was $2 million, the Illinois estate tax exemption was also $2 million.
Present law - "Decoupling"
In 2009 the federal estate tax exemption was increased to $3.5 million. However, the Illinois estate tax exemption for 2009 is fixed at $2 million. As a result, for many Illinois decedents, this “decoupling” (divergence of the Illinois estate tax exemption and the federal estate tax exemption) may result in $209,124 of Illinois estate tax.
Take Action and save $209,124!
As a result of these changes in the law, I suggest amending your existing living trusts to include newly developed tools which address this issue and help to minimize estate tax consequences.
