Illinois Estate Taxes

The Illinois estate tax, which was formerly limited to the federal credit allowed for death taxes paid to a state, has been decoupled from federal law to offset the effects of the phase-out of the federal estate tax over 10 years and the reduction of the state death tax credit over four years.

For persons dying in 2003 through the end of 2005, the Illinois estate tax is equal to the full amount of the state death tax credit under IRC Sec. 2011 (relating to estate taxes) or Sec. 2604 (relating to generation-skipping transfer taxes) as in effect on December 31, 2001, without the reduction or termination of the state death tax credit, but recognizing the increased exclusion amount through December 31, 2005. In plain English, this generally means that the federal taxable estate must exceed $1 million in 2003 and $1.5 million in 2004 and 2005 before any Illinois tax will be due.

For persons dying after December 31, 2005, and on or before December 31, 2009, an exclusion amount of $2,000,000 will be allowed. For persons dying after December 31, 2009, the Illinois estate tax will be equal to the federal credit for state death taxes then in effect.

Deductions. Illinois makes no statutory provision for deductions, but the deductions are essentially based on federal estate tax law. Based on administrative practice, the following deductions can be taken:

• legally enforceable debts
• reasonable funeral expenses
• administration expenses
• executor's and attorney's fees
• real and personal property taxes accrued before death
• trustee commissions to the extent they are for services normally performed by a personal representative or they are considered administration expenses

Returns. The Illinois estate tax return (Form 700) must be filed with the Circuit Court having jurisdiction over the estate at the same time the federal estate tax return is due (usually due within nine months of death). The Illinois Attorney General must get a copy of the federal return. For individuals dying after December 31, 2005, in cases where no federal return must be filed, a person who is required to file an Illinois return must also file a schedule of assets as required by the Attorney General.

The Attorney General assesses the amount of Illinois estate tax due. The Illinois estate tax must be paid at the same time the federal estate tax is due and payable.

Generation-skipping transfer tax. Illinois imposes a generation-skipping transfer tax to the same extent as its estate tax (outlined above).