Reduce Taxes

Believe it or not but everyone who dies with net assets is subject to the estate tax.  The good news is that we all get a credit towards those taxes which wipes them out in most cases.  In some cases though, an individual owes more than the credit amount and they are required to pay the government the difference.  The United States gives everyone a credit that exempts from tax roughly $12,000,000 in assets (2022 numbers).  When it comes to the States, they either give an unlimited credit (i.e. no estate tax) or give a credit that only exempts a certain amount of money.  In Illinois, we give taxpayers a credit that exempts $4,000,000 in assets from estate tax. 

 

The issue then rises about what to do with married couples.  At the Federal level, they have "portability" which allows a married couple to automatically combine their credits which will exempt double the individual amount.  In Illinois, this doubling of the tax benefits for couples is not automatic.  They need to hire an attorney and prepare a living trust for each spouse.  This way, the couple can divide their assets between the two trusts and then take advantage of both spouse's estate tax credit exemption amount.  Otherwise, the first to die's exemption would be wasted and the family would only have one exemption to work with.