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DUELING EXEMPTIONS

Most people who are concerned about the payment of estate taxes concentrate their thoughts on the federal estate tax. Recently with the federal estate tax exemption having been increased to $5.34 million per person and the possibility for married persons of “porting” the unused portion of the exemption of the first spouse to die, that they no longer need be concerned as their estate or combined estates are considerably less than the available federal estate tax exemption. However, persons who are domiciled in Illinois must also consider that the Illinois estate tax exemption is only $4 million and is not portable. Therefore, whether you are a married or an unmarried person, in Illinois there is a differential between the state estate tax and the federal estate tax which will, in most cases, result in the assessment of an Illinois estate tax at a 16% tax rate.

Therefore, when planning one’s estate, one should consider the possibility of such a tax being assessed and plan accordingly. For married persons this may involve the choice of a marital deduction formula which limits the “tax sheltered” gift to $4 million and assigning the balance of the estate to the surviving spouse.

With respect to unmarried persons, if one is motivated by an avoidance of estate tax, then lifetime gifts might be appropriate.

In any event, one should see an experienced estate planning attorney to discuss these issues.

About Alan Sohn

Alan E. Sohn received his Juris Doctorate from the College of Law of the University of Illinois. Mr. Sohn has been a partner in both large and smaller law firms and for the past 21 years has been in private practice. Mr. Sohn - Chicago Estate Planning Lawyer and Business Attorney - is admitted to practice law by the Illinois Supreme Court, the Trial Bar of the United States District Court for the Northern District of Illinois, Seventh Circuit Court of Appeals and the United States Supreme Court. He is also a member of the Chicago Estate Planning Council and the Illinois State Bar Association.
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