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Will your loved ones have to pay an inheritance tax?

On Behalf of | Jan 22, 2025 | ESTATE PLANNING - Estate Planning

When planning your estate, understanding the various taxes that could impact the transfer of your assets to your loved ones is crucial. One common concern among parents is whether their children will be subject to inheritance tax upon receiving their assets. What should you know?

What is an inheritance tax?

Inheritance tax is a tax that heirs pay when they inherit property or money from a deceased person. Unlike estate tax – which the estate pays before the heirs receive their inheritance – beneficiaries pay an inheritance tax after receiving their inheritance. Only a few states impose an inheritance tax.

Does Illinois have an inheritance tax?

Illinois does not impose an inheritance tax. However, it does have an estate tax. The Illinois estate tax is applicable to estates valued over $4 million. This means that if the total value of the estate exceeds $4 million, the portion over the threshold is subject to taxation.

Will taxes impact the support your estate offers your children?

Since Illinois does not have an inheritance tax, your children will not need to pay this tax on what they inherit from you. However, if your estate exceeds the $4 million mark, the estate will need to pay estate taxes before passing to your loved ones.

It is also worth noting that if your children live in or inherit property from someone in a state that does have an inheritance tax, they might be liable to pay that tax according to the laws of that state. In this case, you may want to plan carefully with the support of an experienced estate planning attorney to ensure that you keep these tax burdens in mind when creating your plan.

While Illinois residents do not need to worry about an inheritance tax affecting their children, understanding and planning for taxes is still a crucial step for many people. By taking proactive steps and consulting with legal professionals, you can preserve more of your legacy for your loved ones.

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