One of the central goals of an estate plan is to maintain and protect the wealth that you’ve accumulated throughout your life. However, if your wealth is higher than the estate tax threshold in Illinois, then you may have to pay a fairly significant inheritance tax (or estate tax) after your die. Through intelligent and comprehensive estate planning techniques, you can significantly reduce the taxes on the assets you plan to pass on to your children, family, or other beneficiaries.
At James C. Provenza & Associates in Chicago, IL, we offer experienced-backed guidance and legal representation for Illinois estates. We aim to help you reduce the amount of taxes you may owe, while helping you make the most out of your estate. To speak with Chicago estate planning attorney James C. Provenza about your estate, call our law office today at (847) 729-3939.
Inheritance Tax in Illinois
For deaths in 2016, the federal estate tax applies to estates with a worth over $5.45 million. At the same time, Illinois has its own estate tax that applies to estates with a value of more than $4 million. Estates worth over $5.45 million may have to pay both federal and state estate taxes, while estates worth more than $4 million may have to pay federal taxes, but not state taxes.
Often, you personally won’t have to worry about detailing and adding up the estate tax (as you’ll be dead), but the executor of your estate will need to take care of these matters. Your surviving family and beneficiaries, also, will be affected by how much they receive after taxes.
To determine the amount of inheritance tax you need to pay, or whether or not you need to pay the tax, the executor of your estate will need to add up the assets for your gross estate, including:
- Bank accounts and certificates of deposit
- Stocks, bonds, and investment accounts
- Real estate
- Vehicles and other personal property
- Life insurance proceeds from your policies
- Retirement account funds
- Interests you own in a business (sole proprietorship, limited liability company, or small corporation)
Ways to Cut Your Inheritance Tax in Your Estate Plan
As your estate lawyer, attorney James C. Provenza’s goal is to find ways to transfer your assets to the next generation in the most tax-efficient manner possible. Some strategies for cutting your inheritance tax in your estate plan may include:
- Putting assets into a trust – One way to reduce your overall estate, and therefore cut the inheritance tax, is to put some of your assets into a trust. For instance, you can set up a trust to pay for your grandchildren’s education, or support a family member who has a disability. Keep in mind, however, that some trusts in Illinois have their own tax regulations, and so it might be beneficial to speak to an attorney who can devise a beneficial trust.
- Lifetime gifts to children and grandchildren – You can make annual gifts of up to $12,000 to children or grandchildren without incurring a gift tax. With a husband or wife, you both can then gift up to $24,000. By doing this over a couple of years, you can transfer a substantial amount of money while reducing your estate and, therefore, your estate tax.
- Set up a family limited partnership – A family limited partnership is a tool that can help you transfer ownership of a family-owned business to the next generation, while protecting family assets from creditors.
- Make a charitable transfer – Lifetime charitable transfers or gifts, which are transferred after your death, can reduce the size of the estate and thereby reduce estate taxes.
There are many other methods of cutting down the inheritance tax, and you can benefit most by speaking with your attorney about the best method specific for your estate and your needs.
Contact James C. Provenza & Associates for Your Estate Plan
As the leading estate planning attorney in the Chicago area, attorney James C. Provenza aims to help you create and manage a tax-efficient, effective estate plan. We boast years of experience helping numerous families and individuals in the Chicago area, and we have the resources and know-how to give you the most benefit for your estate. For a free, no-obligation consultation with attorney Provenza, call our Chicago law firm today at (847) 729-3939.