An estate can owe Illinois estate tax even when no federal estate tax is due. The state and federal systems have different thresholds and rules, so both need to be considered when reviewing an Illinois estate plan.
For 2026, Illinois uses a $4 million exclusion threshold. The federal basic exclusion amount is $15 million per person. These figures alone do not determine a family’s tax bill. Asset ownership, prior taxable gifts, deductions, and the year of death can affect the calculation.
How does the $4 million threshold work?
The Illinois exclusion is a taxable threshold, not an amount you simply deduct before calculating the tax. Under current instructions, Form 700 is required when the gross estate plus adjusted taxable gifts exceeds $4 million, even if no federal estate-tax return is otherwise required.
Illinois uses an interrelated calculation. It is misleading to calculate the tax by applying a rate only to the amount above $4 million. The filing threshold and the amount of tax actually owed are also separate questions.
The Illinois Attorney General administers the tax and publishes Form 700, instructions, and a calculator. Use the materials for the applicable year of death.
Why do state and federal rules need separate attention?
The federal system permits a surviving spouse to use a deceased spouse’s unused exclusion when the requirements for a portability election are met. Illinois does not provide corresponding portability of its unused exclusion.
That difference can matter when assets pass to a surviving spouse. A federal portability election does not, by itself, preserve the first spouse’s unused Illinois exclusion. An estate attorney and tax professional can evaluate the documents and ownership arrangements in light of both systems.
The federal $15 million figure applies to deaths in 2026. Always check the IRS estate-tax guidance for the relevant year rather than relying on an older plan’s assumptions.
What information should you gather?
Begin with a current inventory of assets and how they are owned. Useful records include:
- Real estate values and related debt
- Bank, investment, and retirement accounts
- Business ownership interests
- Life insurance policies and ownership details
- Trust documents and beneficiary designations
- Prior gift-tax returns and records of significant gifts
Some property can be relevant for estate-tax purposes even when it passes outside probate. The tax professional and attorney can determine which assets are included and which deductions may apply. For nonresidents with Illinois property, state filing and apportionment rules also require attention.
What planning questions should you discuss?
Planning should reflect your family goals as well as taxes. Ask your professionals to consider:
- Ownership and beneficiaries: Do account titles and beneficiary choices support the document plan?
- Trust provisions: Would a different arrangement help address a spouse’s needs or state estate-tax exposure?
- Liquidity: How would the estate meet taxes and expenses without an unplanned sale?
- Lifetime gifts: What are the gift-tax, income-tax, and ownership consequences of a proposed transfer?
- Business interests: Are valuations and succession arrangements current?
These are topics to evaluate, not a list of steps every family should take. Legal documents belong with qualified counsel. Tax and investment decisions should be coordinated with that work.
When should you review the plan?
A marriage, divorce, death, inheritance, business sale, or move can change the assumptions behind an estate plan. Significant changes in asset values or tax law can also justify a review.
For a married couple, discussing both spouses’ plans while both are alive can clarify the available choices. After a death, contact the estate attorney and tax professional promptly to identify filing responsibilities and deadlines.
Frequently asked questions
Does being below the federal exemption mean no Illinois tax is due?
No. Illinois has a lower threshold and its own calculation. Review both systems.
Is the Illinois threshold $8 million for a married couple?
Do not assume the two exclusions combine automatically. Illinois does not offer spousal portability. Ownership and estate documents affect how each spouse’s estate is treated.
Does a revocable living trust automatically remove assets from estate tax?
No. A revocable trust is not, by itself, an estate-tax exemption. Ask counsel and your tax professional to assess the specific terms, ownership, and tax treatment.
Which agency handles the Illinois return?
The Illinois Attorney General administers the estate tax. Its website provides the return and instructions, including separate directions for making payments to the State Treasurer.
Discuss your circumstances
Our Tax & Accounting team can discuss your tax questions and coordination with your estate attorney. For investment and liquidity planning, see Wealth Management. Tax and accounting services are provided by NRACPA LLC; investment advisory services are offered through Archer Investment Corporation under a separate engagement.
Prospective clients can book a free initial consultation. Existing clients can book a meeting to review their current needs.
Sources
- Illinois Attorney General: Estate-tax forms, instructions, and calculator
- Illinois Attorney General: Estate-tax instruction fact sheet
- IRS: Estate tax and filing thresholds
- IRS: Frequently asked questions on estate taxes
Figures reflect the guidance available as of October 5, 2026. This article provides general information, not individual legal, tax, or investment advice.
This article provides general information. Tax and investment decisions depend on your individual circumstances and current rules. Contact the office to discuss your situation.
