We work hard to provide for our families. We sacrifice, we save, and we make financial decisions with the future in mind. Ultimately, it is all done to provide a good life for your family during your lifetime and beyond. That is why many people who have accumulated great wealth in their lifetime resent that the government is going to take a massive chunk of your financial legacy when they pass away. These taxes are not-so-lovingly referred to as death taxes.
When you hear the term “death tax”, it usually refers to the estate tax. This is a 40% tax that the IRS takes from a person’s estate upon their passing. Significantly, there is an exemption of $5.49 million for individuals and $10.98 million for couples. This means that an individual can leave behind $5.49 million before they are taxed and a couple can leave $10.98 million. As a result of the estate tax, many wealthy people tailor their estate plans around these exemptions.
Only fifteen states in the country impose their own estate tax in addition to the Federal estate tax. Unfortunately, Illinois is one of those fifteen states. In addition, the state estate tax exemption is only $4 million, which is $1.49 million less than the federal exemption. This discrepancy is because unlike the Federal exemption, Illinois does not tie their exemption to inflation. Ultimately, this means that your estate may not owe a Federal estate tax, but can still owe the state of Illinois. You should speak with an estate planning attorney if this applies to you.
While “Death Tax” is most often used to describe estate taxes, it is also used to describe inheritance taxes. Inheritance taxes are different than estate taxes, in that the person who inherits property—and not the estate—is responsible for paying the taxes. Fortunately, there is no federal inheritance tax. Instead, the estate bears the tax obligation if the value of the estate exceeds the estate tax exemption. In fact, there are only six states in the country that impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania.
Contact an Experienced Attorney for Assistance
You have worked your entire life to provide for your family. Estate planning is an essential step to make sure that they continue to be taken care of. You need an estate planning attorney who remains up to date with the status of state and federal laws and can guide you through the ever-changing realms of tax law, finance, and probate. I have practiced for over two decades in the areas of estate planning, tax law, family law, and probate and have a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court. Let me help you attain your estate planning goals. Contact The Law Offices of Robert S. Thomas at 847-392-5893 to schedule a consultation or visit our website today.