Changes in tax law can affect how much of your wealth passes to your family. In 2026, Illinois families face an important difference between federal and state estate tax rules. The federal exemption has increased, but Illinois still uses a much lower threshold. Reviewing your estate plan can help you see how these rules may affect your home, savings and other assets.
Under the 2025 federal tax legislation, the 2026 federal basic exclusion amount is $15 million per person, or $30 million for a married couple. The law has no scheduled sunset, but future Congresses can change tax rules. This means the expected drop in the federal exemption did not happen, yet state estate taxes remain a concern for many Illinois families.
How federal and Illinois estate taxes differ
Illinois has a $4 million estate tax threshold. Unlike a standard deduction, this threshold works like a cliff. If an estate falls below $4 million, it generally owes no Illinois estate tax. If it crosses that threshold, the tax calculation applies to the entire taxable estate, not just the amount above $4 million. Rates can reach 16%.
For example, an estate worth $4.5 million may face Illinois estate tax on the full taxable amount, subject to the state’s calculation rules. The tax owed depends on the estate’s details, including applicable deductions and credits.
Married couples also face a planning challenge. Under federal law, a surviving spouse may claim the unused portion of their late spouse’s estate tax exemption by meeting certain filing requirements. Illinois does not offer the same portability. If one spouse leaves all assets directly to the other, the first spouse’s Illinois exemption may go unused. A bypass trust or other estate planning tools may help a couple use both Illinois exemptions.
What to review in your estate plan
Reviewing your current plan can help you spot gaps and keep your documents aligned with your wishes. Key areas to consider include:
- Wills and trusts: Check whether your documents reflect your current wishes.
- Beneficiary designations: Review who receives retirement accounts and life insurance proceeds.
- Asset values: Reassess your home, investments and business interests as their values change.
An estate planning attorney can review your assets and family goals to assess whether changes to your plan may help reduce potential estate taxes.
Keeping your family’s future in focus
The federal exemption is currently set at $15 million per person, but Illinois’s $4 million threshold can still affect families with substantial assets. Reviewing your plan can help protect your wishes and prepare your loved ones for the future.
