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There is a federal tax on estates and gifts. Some states also have taxes. Before 2003 Illinois taxed estates only if there was a federal tax. The Illinois tax was the amount of the federal credit for state taxes so there was no increase over the federal tax without a state tax. However, the federal tax credit for state taxes is being lowered so Illinois now imposes an estate tax in the amount the federal credit used to be. The federal tax is a single tax on all transfers either during life (gifts) or at death. It is progressive and starts at 18% on the first $10,000 of transfers and goes up to 45% after transfers exceed $1.5 million. It is cumulative so each gift adds to the amount to be taxed. There is a credit against the federal estate tax which allows $3,500,000 to pass tax free. This makes the effective estate tax rate 45%. For gifts during life the credit allows only $1,000,000 to pass tax free so the gift tax effectively starts at 41%. NOTE: There currently is no Federal or state estate tax or generation skipping tax. The gift tax is still in effect. Whether or not the estate and generation skipping taxes will be reinstated this year is not known. Many people expect that they will be reinstated, but what will happen is not known. What the rates and exemptions will be if the taxes are reinstated is also not known. Click here for more. || Back
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Chicago Estate
Planning Attorney Donald M. Thompson |
