Illinois Inheritance Tax & Probate

Illinois Inheritance Tax & Probate


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Illinois Inheritance TaxUnlike many states in the US, Illinois inheritance tax is applicable even if you have paid the federal estate tax. You will pay the federal estate tax if you inherit an estate worth more than $5.45 million. The inherited estate involves all assets including any property, retirement account, savings, bonds, etc. Any property you inherit will go through the probate process. On the other side, you must pay Illinois inheritance tax upon receiving an asset worth $4 million. That means, you may not have to pay the federal estate tax, but you will pay the state inheritance tax if you inherit assets worth more than $4 million.

Difference Between Illinois Inheritance Tax and Estate Tax

An estate tax is what you will pay to the government. The probate court deducts this tax once the probate is over. Inheritance tax is different, and beneficiaries will pay this tax after receiving their share. The estate tax laws keep changing so; please consult a tax attorney to know about the latest regulations in this sector.

Illinois Inheritance Tax, Rules and Regulations:

Probate in Illinois

Each inherited estate (other than the ones found in a living trust) must go through the probate process. While the advertised benefit of a probate is to make sure that beneficiaries receive their share of the inheritance, it is actually not the case. The probate process is mandatory to ensure that the governing agencies receive their share of tax and payable funds. Only after the taxes are paid on the estate, you will be able to distribute it to the beneficiaries.

Illinois Estate Tax

The tax calculations vary, but in most cases, the tax is calculated on:

“The total monetary value of the estate+ All the federal gifts given in the lifetime of the deceased person.”

  • According to laws, you do not have to pay federal tax if the value of the estate does not exceed $5.45 million. Any amount exceeding $5.45 million is tax deductible.
  • The federal tax rate is a maximum of 40%. However, the Illinois tax rate can be a maximum of 16%.
  • Under the right of survivorship, in many states of the US, the surviving spouse can keep the co-signed assets of the deceased person without having to go through the probate process. This situation applies to mutually owned property. If one spouse dies, the other can assume the ownership of the building, and the probate process will not be applicable. The same goes for the Illinois, and surviving spouses can receive their share of inheritance which is considered an “exempt” asset and they do not have to pay federal or state taxes.
  • The estate tax is due within nine months of the death. You can request an extension in the deadline by submitting an application within those nine months. You will have to pay interest rates, and you must pay the due taxes in next six months or a maximum of 15 months after the death of your loved one.
  • Since the federal estate tax is imposed on large estates only, more than 99.7% people do not pay any taxes. However, in rare cases, you will have to pay both the federal estate tax and state inheritance tax.

Filing Inheritance Tax In Illinois

In a formal probate process, it is the executor’s job to file the inheritance tax return. The executor will only submit one report regardless of how many beneficiaries are inheriting the estate. The maximum inheritance tax rate in Illinois is 16%, and it varies depending on how close you are to the deceased person. Distant relatives have to pay more while children and siblings pay significantly less. Keep in mind, the executor files only one tax return, but each person who inherits must pay his/her own taxes.

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