Although it is not called an inheritance tax, the state of Illinois has an "estate and transfer" tax that is essentially the same thing; it collects revenue for the state from the transfer of property between deceased people and their families. The base exemption from the tax has fluctuated as it is tied to the federal inheritance tax, which returns in 2011 after a five-year hiatus.
Where it Starts
The Illinois estate tax comes into play only with taxable estates valued at more than $2 million in 2009. There are various credits and exemptions that ensure that most families with lower and middle income estates won't have to pay the estate tax. However, some property-rich, cash-poor households (like farms) see the estate tax in Illinois as unfairly targeting them. Even so, an inheritor seeking to gain a taxable estate worth $10 million would be able to protect more than $4 million of it from the state inheritance tax and pay only $926,000.
How it Works
The State of Illinois allows for each estate to receive an "exclusion" on the first $2 million of its value, along with another credit that fluctuates with the estate's value. Careful estate planners can all but avoid paying Illinois estate taxes by denoting all property after the first $2 million as a "marital gift." Inheritors of estates larger than $2 million can expect to pay no more than 11 percent of it in tax, and usually much less.
As the Illinois estate tax is tied to the federal estate tax law, which was repealed until the start of 2011, the initial exemption will fall to $1 million if another law is not enacted. This has many families questioning the penalty they will bear if they inherit property after 2010 when compared to previous years. As of June 27, 2010, no new legislation has been enacted to resolve the concerns.
- chateau impney estate image by david hughes from Fotolia.com