STATUS REPORT

January 28, 2011

 IMPORTANT NOTICE REGARDING THE ILLINOIS ESTATE TAX

Earlier this month I reported to you that the Federal government re-imposed the federal estate tax with a $5 million exemption per person in 2011.  The exemption amount is indexed for inflation beginning in 2012; however, the federal estate tax will sunset on December 31, 2012 unless Congress takes action to extend the tax.

As of January 1, 2011, there was no Illinois estate tax; but as a result of the enactment of Taxpayer Accountability and Stabilization Act (the Act that increased the Illinois income tax), Illinois now imposes an Illinois estate tax upon decedents’ dying after December 31, 2010.  It provides for a $2 million exemption per person.

Some estate plans provide for a division of assets between a credit shelter trust (sometimes called the ”Family Trust”) and a marital amount according to a formula that allocates the maximum amount that can be sheltered from federal estate tax to the  credit shelter trust.  Of course, with the substantially increased exemption, a greater portion (or perhaps all of the property) will be allocated to the credit shelter trust.

With the Illinois Estate Tax exemption set at $2 million, an Illinois decedent with a $5 million estate being administered under a typical formula clause requiring allocating the $5 million to the credit shelter trust, would expose that estate to $352,158 of Illinois estate tax.  

This disconnect between the Federal exemption and the Illinois exemption suggests that you undertake a review of your current estate plan to ascertain whether there are any changes that should be considered at this time. If you would like to meet, please call our office at 630-571-0222 to schedule an appointment.  We look forward to seeing you.

Cordially,

Darcy J. Chamberlin