Welcome to the EPAC Corner! We are pleased to bring you this content from the Estate Planning Advisory Committee (EPAC) of the DeKalb County Community Foundation. If you have any questions about the information below or the EPAC group, please contact Community Foundation Executive Director Dan Templin at 815-748-5383 or dan@dekalbccf.org. 

The EPAC Corner content aims to provide general information about estate planning and charitable giving. We hope it’s helpful and informative. Suggestions for monthly content topics are welcome. We’d love to hear from you.

Estate tax myths and proper planning 

Benjamin Franklin is famous for saying, “In this world, nothing is certain except death and taxes.” But, in the case of death taxes, nothing is certain. The State of Illinois imposes an estate tax on individuals with a taxable estate plus adjusted taxable gifts in excess of $4 million. The federal estate tax applies to individuals with an estate (plus adjusted taxable gifts) over $13.61 million.

There are unsuccessful proposals every year in Springfield to change the threshold for the Illinois estate tax. In Washington, D.C., there has been limited discussion about the estate tax since 2017. Still, more discussion will come soon as the federal estate tax exemption is set to be reduced in January 2026.

In response to this unpopular tax, 38 states have eliminated the estate tax entirely, although the federal estate tax still applies to those states.

Here are four common myths about the estate tax:

Myth 1: 

• Only billionaires have to worry about the estate tax. If you live in Illinois and your total household net worth approaches $4 million, you need to plan for the estate tax. For example, if a husband and wife each have $1.5 million in retirement accounts and own their home, they should consider steps to minimize the potential Illinois estate tax.

Myth 2: 

• Estate tax is a probate tax. The estate tax has nothing to do with probate. The estate tax is based on the total value of your assets at the time of your death. This includes assets with beneficiary designations, life insurance, jointly-owned assets, trust assets, and probate assets.

Myth 3:

• You can give away assets to have less than $4 million and avoid the Illinois estate tax. The calculation of the Illinois estate tax includes the value of some lifetime gifts. If the total value of your estate at death, plus adjusted taxable gifts during life, exceeds $4 million, then an Illinois estate tax will be due.

Myth 4:

• You can avoid the Illinois estate tax if you move to another state if your Illinois assets are less than $4 million. Moving to one of the 38 states without an estate tax has become a popular tax planning strategy for  high-net-worth individuals. However, as long as you own real estate or tangible personal property in Illinois, you will be subject to the Illinois estate tax at a reduced rate.

The estate tax can be minimized or avoided entirely through appropriate tax planning. This planning can include charitable giving since charitable gifts are deductible for estate tax purposes. If you are concerned about potential estate tax, contact your attorney, accountant, or financial advisor to review the potential tax and discuss planning strategies.

– Matthew L. Brown, local attorney and member of the DeKalb County Estate Planning Advisory Committee

Established in 2020, the DeKalb County Estate Planning Advisory Committee (EPAC) comprises of local professionals providing estate planning services, including attorneys, trust officers, CPAs, wealth advisors, and insurance agents. The purpose of the EPAC is to raise awareness and understanding of the Community Foundation as a resource for professional advisors and their clients, assist with efforts to deliver effective estate planning education to the general public and notify estate planning professionals on topics relevant to the intersection of estate planning and philanthropy.

Matthew L. Brown