Estate tax thresholds may not be the most entertaining of topics, but for estate planners and Illinois residents, they hold significant weight at this moment. A proposed bill in Illinois has set the stage for a potential reset in how residents approach estate planning in this state. This guide will provide an overview of the proposed bill and prepare you for the implications should it pass into law.
Current Estate Tax Landscape in Illinois
Illinois, like many states, imposes an estate tax on the transfer of a deceased person's estate. It currently operates under a "graduated" tax system, with exemptions and rates that vary based on the size of the estate. The current threshold stands at $4 million, which means any estate valued over this amount is subject to Illinois estate taxes.
This threshold has been a focal point for estate planning strategies, driving residents to establish Trusts and make other financially savvy maneuvers to reduce their potential estate tax liability. For those with estates near or above the $4 million mark, even the traditional blanket exemption can fall short. Meticulous and strategic planning is always necessary.
Any Illinois resident with an estate valued under $4 million can pass their property to their heirs without the estate tax. However, a proposed bill stands to make some changes to these rules.
Proposed Changes in the New Bill
The new bill in Illinois, Senate Bill 2921, is aiming to significantly increase the threshold, which could potentially raise the line at which estates are taxed. This is welcomed news for estate planners and Illinois residents who have long considered the $4 million bar to be relatively stringent compared to other states. The bill proposes to raise the exemption amount to $6 million, a significant increase.
Should the bill become law, the immediate Beneficiaries would be those with estates hovering around the existing threshold. The increase would potentially shield more estates from Illinois estate taxes, paving the way for a more straightforward approach to estate planning for a larger segment of the property-owning population.
Implications for Illinois Residents
If the bill passes, Illinois residents will have to revisit and potentially overhaul their tax planning strategies. Trusts, asset allocation, and life insurance will need to be re-evaluated to align with the new tax landscape. A changed estate tax threshold could both simplify and complicate the tactics used by residents to protect and pass down their wealth.
According to one news source, this policy was created with farmers in mind. Because farmland is particularly illiquid, the bill holds the potential to help Illinois farmers from having to sell land to pay the estate tax.
Those already with established estate plans could see immediate impacts. Wills, Trusts, and other components will require review to ensure that the remain effective under the new exemption threshold. For farmers and other property owners, this proposed could be a game changer if passed. Farmers who were planning to sell off land to afford the estate tax could potentially be able to pass down their land intact to their loved ones.
If you are an Illinois resident who may be hovering around the current $4 million threshold, this proposed bill is a call to action to review your current estate plan. The threshold potentially increasing by $6 million creates significant implications for your existing estate planning strategy. Consulting your tax and legal advisors is highly advisable. Being proactive will help ensure you're not caught off-guard by potential ripple effects this legislative change may cause.
Review & Update your Estate Plan with Trust & Will Today
Illinois's proposal to increase the estate tax threshold is a call for estate planners, tax professionals, and Illinois residents to pay attention and be poised to adapt if needed. The changes, if enacted, would significantly reshape the financial planning terrain in the state. It's incumbent on all stakeholders to inform themselves, engage thoughtfully, and be ready to act.
As with any legislative proposal, the final outcome is subject to public debate and adjustment. The proposed bill may bring about a significant change that deserves close attention from anyone it may impact.
If you're in the market to establish your estate plan or for a platform that will allow you to conveniently review and revise an existing plan when changes such as this take shape, Trust & Will has just what you need. Our online platform and secure digital vault takes away the headache of reviewing and updating your estate plan so that you can remain agile and adaptive. Find out how easy it is to set up a Trust-based estate plan with Trust & Will today!
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