When creating an estate plan, it is vital that you take the steps to have a plan in place concerning the taxes associated with estate plans. Residents of Chicago, IL who are creating an estate plan should educate themselves on the various types of taxes that can directly impact the overall value of an estate. Make sure that your estate plan has provisions for any applicable taxes.
There are currently provisions in the federal tax code that exempt up to $14,000 in annual gifts. If any part of your estate plan includes a gift of more than $14,000 the gift becomes taxable. However, there is also a federal gift tax exemption that covers a lifetime gift amount of $5,340,000 you can apply against the application of the gift tax.
State inheritance taxes
There is not currently a state inheritance tax in place in Illinois. However, if you own assets in one of the six states that do enforce a state inheritance tax, you should make provisions for those taxes in your estate plan. If you are bequeathing assets in any of those six states, you should educate yourself on the exemptions that are available to a surviving spouse and some other descendants.
Generation skipping transfer tax
Known as the GST, the Generation-Skipping Transfer Tax applies to estate assets that meet a certain value requirement that skip one or more generations. For instance, a decedent who leaves assets that meet a minimum value to their grandchildren or great-grandchildren has assets that are subject to the GST. However, an attorney in the state where the asset is located can advise you about GST in that state.
All estate planning should involve the help of an estate planning attorney. This attorney can help you gather information about your assets while also helping you create a plan that addresses the taxes associated with your estate.