As this Wall St. Journal story explains, many states have an inheritance tax and Illinois is one of them. The tax kicks in on estates of $2 million or more. We tend to pay attention to only the federal inheritance tax limit of $3.5 million. This is one reason to make your domicile in Florida if you have a large estate (since FL has no inheritance tax).
The Illinois House passed, and the Senate is reviewing, a bill that would prevent estate tax from being owed on the first to die of a husband and wife with a large estate. It looks like it will pass the Senate easily.
Technically, the bill does this:
“Amends the Illinois Estate and Generation-Skipping Transfer Tax. Provides that the State tax credit for the estates of persons dying after December 31, 2005 and on or before December 31, 2009 includes a reduction for qualified terminal interest property. Effective immediately.”
That’s a mouthful, but it means that there would be no estate tax due on the first death of a married couple. The history of the bill is here. I previously wrote about this problem and advised couples with large estates to amend their trusts to include a state marital trust.
I’m glad to see that they are patching up this mess before tax is paid by too many widows/widowers.
Word is that the new president will try to lock in the estate tax exemption amount at $3.5 million.