Estate tax planning has enjoyed a more prominent position in estate planning in the past when individual exemptions were leveled out at $675,000. Today, estate taxes do not affect as many people. In Illinois, the individual exemption is $4M, and the Federal exemption is over $5M and climbing by a cost of living factor every year. Estate tax planning is not a consideration for many people in light of the current exemption amounts.
But those who are fortunate enough to have accumulated an estate that exceeds the individual exemption amounts should include estate tax planning in their estate planning. Everyone should also be mindful of changes in the law that adjust the current exemption amounts and be ready to address estate taxes in our estate planning if the exemptions amounts are changed again.
Anyone with an estate that is approaching $4M or greater in Illinois, or who anticipates inheriting or acquiring assets that might tip the estate over the $4M mark at some point in the future, should include estate tax planning into the estate planning.
Married couples have an advantage when it comes to estate tax planning. The individual exclusion amounts for individuals can be doubled for a couple with the right planning. Therefore, the individual exclusion amount of $4M in the State of Illinois can be doubled for a couple, thereby sheltering a total of $8M from State estate taxes with the right planning, and the current federal exclusion amount of $5.43M can be doubled to shelter $10.86M from federal estate taxes.
The estate tax planning that is required to maximize the use of individual exclusions is complicated and requires a knowledgeable and experienced attorney. Attorneys who only dabble in estate planning should not be used when it comes to estate tax planning. A person who needs estate tax planning should find an attorney who makes estate planning a regular part of his or her practice.
There are many nuances to estate tax planning, and those nuances and complexities are greater when dealing with couples for which one or both of the spouses are in a second or subsequent marriage, and have children from a prior marriage or marriages.
If your estate is approaching the individual State estate tax exemption ($4M), and if you have not done any planning to avoid estate taxes that will kick in if your estate exceeds that threshold, please contact us so that we can help you minimize or eliminate that estate tax liability.