Do you know that your estate might have to pay tax after you die? Estate tax affects your right to transfer your property after your death. If the administrator of your estate refuses to pay this tax, your wishes in your will as regards inheritance and the general distribution of your assets will not be carried out.
Hiring a competent real estate attorney can help your family and executors avoid the hassle of unpaid taxes after your demise. A real estate attorney can help you easily determine what taxes are due on your estate and how to reduce the costs of some of these taxes.
How Much Will My Estate Have To Pay?
In Illinois, the estate tax threshold is $4 million. Your estate will owe nothing if it is worth less than the set threshold. If your estate is worth more, there is a maximum tax rate of 16%. The estate tax rate is graduated which means that the higher the value of your estate, the higher the tax rate to be paid will be.
To determine the total value of your estate, the fair market value of your assets will be used. This is the current value of your estate in the market.
The Illinois estate tax applies to property purchased and situated in Illinois by both residents and non-residents. However, just as there is a state estate tax, there is a federal estate tax. Fortunately, the threshold for the federal tax is far higher. In 2023, it is $12.92 million. This amount is over three times the threshold for Illinois state tax and is higher than the value of most estates.
Can My Estate Taxes Be Reduced?
Under certain circumstances, you can be exempted from paying estate taxes in Illinois. If you are a homeowner, up to $10,000 can be taken off the estimated value of your estate. Also, homeowners over the age of 65 are entitled to an $8,000 reduction. This means that as a homeowner over 65 years, your estimated estate value can be reduced up to $18,000.
Returning veterans and differently-abled persons are also allowed low reductions on their estimated estate value.
Asides from exemptions under the Illinois estate law, there are strategies your real estate attorney can recommend and implement to help you completely avoid paying estate taxes.
One way is by gifting people parts of your estate that they will not be required to pay taxes on. Another strategy is by creating an irrevocable life insurance trust which will take death benefits out of your estate. For example, a life insurance policy with a million-dollar death benefit will take $1 million off your estate and thus, reduce the value of your estate.
By taking care of your estate taxes while you are alive, you are providing ease for your family when you are gone.
Real estate attorneys are important in putting your estate in order. If you are worried about your estate taxes, contact a seasoned attorney.
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