Illinois Estate Tax: Exemption, Who Pays, and Planning

Illinois estate tax: the short answer

Illinois has an estate tax, and it starts well below the federal one. The Illinois estate tax exemption (the statute calls it the exclusion amount) is $4,000,000 per person. The rule is in the Illinois Estate and Generation-Skipping Transfer Tax Act, 35 ILCS 405. If your gross estate plus the taxable gifts you made during life exceeds that figure, your executor or trustee must file Illinois Form 700 with the Illinois Attorney General. The return is due within nine months of death, whether or not a federal return is due. The figure is not indexed for inflation, it has not changed since 2013, and, unlike the federal exclusion, it is not portable between spouses. Illinois has no inheritance tax: the estate pays, not the people who inherit.

For deaths in 2026 the federal basic exclusion is $15,000,000 per person, so for most families in the southwest suburbs the Illinois tax is the only estate tax in play. What follows is the law as of October 2026, with every figure taken from the statute, the Attorney General's instruction sheet or the IRS.

Does Illinois have an estate tax or an inheritance tax?

An estate tax. The tax is imposed on the transfer of a deceased person's property and is paid by the estate before anything is distributed (35 ILCS 405/3). Illinois has not had an inheritance tax on the recipient since January 1, 1983; today the estate pays, and a child who inherits $1,000,000 from a parent owes Illinois nothing on receiving it.

How much is the Illinois estate tax exemption in 2026?

The exclusion amount is $4,000,000 for persons dying on or after January 1, 2013 (35 ILCS 405/2). The Attorney General's instruction sheet describes it as "a taxable threshold and not a credit against tax." That distinction matters. Once an estate crosses the line, the interrelated calculation taxes the excess over $4,000,000 at a steep effective rate from the first dollar: the Attorney General's examples put the tax at $28 on an estate $100 over the threshold and at $285,714 on an estate $1,000,000 over it, about 28.6 percent of the excess.

The threshold is measured by the gross estate plus adjusted taxable gifts. "Gross estate" takes its federal meaning under 26 U.S.C. §2031: everything you own or control at death at fair market value, before debts. That includes the house, accounts, retirement plans, the death benefit of life insurance you own on your own life (26 U.S.C. §2042), and your share of jointly held property. Adjusted taxable gifts are lifetime gifts above the federal annual exclusion that you reported on Form 709. Debts, administration expenses, and amounts passing to a spouse or to charity are deducted later in the calculation, but they do not change whether a return is required.

How is the Illinois estate tax calculated?

Illinois borrows the federal credit for state death taxes as it stood on December 31, 2001, and treats that credit as its tax, "recognizing the exclusion amount of only" $4,000,000 (35 ILCS 405/2). The 2001 credit table runs from 0.8 percent on the first dollars of an adjusted taxable estate to 16 percent on amounts over $10,040,000. Because the Illinois tax is itself deductible on the federal side, the Attorney General calls the result an "interrelated calculation" and publishes an online calculator for it.

The examples in the Attorney General's instruction sheet show how steep the first steps are:

Read the $5,000,000 line again. The estate is $1,000,000 over the threshold and the tax is $285,714, more than 28 percent of the excess. That is what "threshold, not credit" means in practice, and it is why an estate that is "only a little over" is still worth planning for.

The Florida line shows the apportionment rule. The tax is first computed as if everything were in Illinois and then multiplied by the ratio of Illinois assets to total assets (35 ILCS 405/3(c)). An Illinois resident with a Florida condominium pays Illinois tax on the Illinois share only; a Florida resident with a Chicago rental building files an Illinois return for the Illinois share.

Who pays the Illinois estate tax, and who files?

The estate pays, through the executor named in the will or, for a trust-based plan, the successor trustee. The statute puts the filing and payment obligation on the same person who is required to file the federal return, "or who would have been required" to file one if a federal tax were due (35 ILCS 405/6(c)). The return is Form 700, filed with the Attorney General; for Cook, DuPage, Lake and McHenry County decedents, the original goes to the Revenue Litigation Bureau's Estate Tax Section at 115 S. LaSalle St., Chicago. Since July 1, 2012, the tax itself is paid directly to the Illinois State Treasurer, using the Treasurer's estate tax payment form (35 ILCS 405/6(e)(3)).

A return is required whenever the gross estate plus adjusted taxable gifts exceeds $4,000,000, even if the marital or charitable deduction brings the tax to zero. The Illinois QTIP election described below can only be made on a timely filed return. An estate that skips the return because "everything went to my wife" has, if the plan left property in trust for her, given up the Illinois QTIP election that would have protected the children at her death.

When is the Illinois estate tax return due?

Nine months after the date of death, the same day the federal return would be due (35 ILCS 405/6(a)). Two kinds of extension exist. If the IRS grants a federal extension to file or pay, Illinois follows it; the executor sends the Attorney General a copy of the approved federal request. Separately, the Attorney General can grant an Illinois extension for reasonable cause on Form 700-EXT or a written explanation, and the instruction sheet asks that the request be filed within the nine months (35 ILCS 405/8(c)).

An extension of time to file is not an extension of time to pay. Interest runs at 10 percent per year on any unpaid tax from the original nine-month due date, without regard to extensions (35 ILCS 405/9). The late-filing penalty is 5 percent of the tax per month up to 25 percent, and the late-payment penalty is 0.5 percent per month up to 25 percent, each waivable for reasonable cause (35 ILCS 405/8).

Is the Illinois exemption portable between spouses?

No. Federal law lets a surviving spouse add the deceased spouse's unused exclusion to her own by filing a federal return at the first death. The Attorney General's instruction sheet states that portability "is inapplicable to the computation and assessment of the Illinois Estate Tax." Each spouse has a $4,000,000 exclusion, and the first spouse's exclusion is used at the first death or lost.

The practical consequence is the most common Illinois estate-tax mistake. A couple with $6,000,000 between them leaves everything to each other outright. The first death is tax-free under the marital deduction. The survivor now owns $6,000,000 with one $4,000,000 exclusion, and the children pay Illinois tax on the second estate. With the right trust provisions, the same couple pays nothing: the first spouse's share up to $4,000,000 goes into a credit-shelter trust for the survivor's benefit, and the rest passes to the survivor outright or in a marital trust. The Attorney General's last example, the $13,610,000 estate that owes $0, is exactly that structure using the Illinois QTIP election.

What is the Illinois QTIP election?

Qualified terminable interest property is property left in a trust that pays the surviving spouse all the income for life, with the remainder controlled by the first spouse's plan. A QTIP election lets that trust qualify for the marital deduction. Since 2009, Illinois has allowed an Illinois-only QTIP election, "separate and independent" of the federal one (35 ILCS 405/2(b-1)).

Because the federal exclusion is $15,000,000 and the Illinois exclusion is $4,000,000, the two elections can differ. A plan can shelter $4,000,000 in a credit-shelter trust, elect Illinois QTIP treatment for the next tranche so no Illinois tax is due at the first death, and make no federal QTIP election at all. The elected property is included in the survivor's Illinois estate at the second death, which is the trade. The election is made on page 2 of a timely filed Form 700 with a list of the QTIP property; miss the return and the election is gone.

What planning changes the Illinois estate tax?

• Trust provisions for married couples. The credit-shelter trust and the Illinois QTIP election are the two tools that use both spouses' exclusions. They are drafting choices in the will or revocable living trust, not separate products.
• Lifetime gifts. Illinois has no gift tax. Gifts within the federal annual exclusion, $19,000 per recipient in 2026, never enter the calculation. Larger gifts count as adjusted taxable gifts toward the $4,000,000 threshold, but the growth on the gifted asset after the gift date is out of the estate for good.
• An irrevocable life insurance trust. Life insurance you own is in your gross estate at its full death benefit. A $1,500,000 term policy is often the asset that pushes a family over $4,000,000. A trust that owns the policy from the start, or receives it more than three years before death, takes it out.
• Charitable gifts at death are deducted in full.
• Business owners. A closely held business is valued at fair market value, and lifetime transfers of business interests are the core of business succession planning.

The tax-side reading changes the legal advice here, and this is where it helps that the lawyer drafting the plan is also a CPA. Property included in your estate at death takes a new income-tax basis equal to its date-of-death value under 26 U.S.C. §1014; property you give away keeps your old basis.

A gift that saves Illinois estate tax can cost the children federal capital-gains tax, the net investment income tax and Illinois income tax on the built-in gain when they sell. On an appreciated asset that combined bill can exceed the estate tax it avoided. Which assets to give, which to hold, and which to put in a trust is arithmetic that has to be run before the documents are drafted. Because that analysis is part of the legal advice on the plan, it is covered by the attorney-client privilege; the privilege does not cover return preparation or bookkeeping, and our attorney-CPA page explains the line.

Is the $4,000,000 figure going to change?

Bills to change it are introduced every session. Several bills in the 104th General Assembly would raise or replace it; none has passed either chamber as of October 2026. Plan on $4,000,000.

Frequently asked questions

What is the Illinois estate tax rate?

There is no single rate. Illinois uses the 2001 federal credit table, with brackets from 0.8 percent to 16 percent, inside an interrelated calculation that the Attorney General's online calculator performs. The Attorney General's examples put the tax on a $5,000,000 Illinois estate at $285,714.

Does life insurance count toward the $4,000,000?

Yes, if you own the policy. The full death benefit of a policy you own on your own life is included in your gross estate under 26 U.S.C. §2042, even though the beneficiary receives it income-tax-free. A policy owned by an irrevocable trust from inception is not included.

Do I have to file Form 700 if everything goes to my spouse?

Yes, if the gross estate plus adjusted taxable gifts exceeds $4,000,000. The marital deduction may bring the tax to zero, but the return is still required, and, if the plan leaves property in a marital trust, it is the only place the Illinois QTIP election can be made.

What to do next

If you want to know whether your family has an Illinois estate-tax problem and what it would take to fix it, call (708) 722-2222 or request a consultation. Bring a one-page list of what you own, what it is worth, how it is titled and who the beneficiaries are. We will run the numbers, explain the realistic range of outcomes under the current law, and quote the fee in writing before any drafting starts. What a plan costs is covered in our article on estate planning costs in Illinois, and the full practice is on the estate planning page.

General information as of October 4, 2026; not legal advice; laws change; consult a lawyer about your situation.