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Title Tag: Illinois Estate Tax (2026): $4M Exemption, No Portability & the AB Trust Solution - ProbatePedia

Meta Description: Illinois imposes an estate tax with a $4,000,000 exemption — far below the $15M federal threshold. With no portability between spouses, married Illinois couples with estates over $4M face a potential 16% state estate tax bill that AB trust planning could eliminate. Here's the full analysis.

Illinois Estate Tax (2026): The $4M Cliff, No Portability & the AB Trust Solution

Last Updated: March 2026 • 35 ILCS 405/ (Illinois Estate and Generation-Skipping Transfer Tax Act)• IL Series — Article 6 of 8

| Illinois Estate Tax — 2026 At a Glance | | | --- | --- | | Governing statute | 35 ILCS 405/ (Illinois Estate and Generation-Skipping Transfer Tax Act) | | State estate tax exemption | $4,000,000 (flat; not indexed for inflation since 2013) | | Federal estate tax exemption | $15,000,000/person (PL 119-21, July 4, 2025) | | Gap between IL and federal | $11,000,000 — IL taxes estates that federal law does NOT tax; critical for $4M–$15M estates | | Tax rates | Graduated: 0.8% on first $250K above exemption → up to 16% on amounts over $10.04M taxable | | Portability (IL state) | None — IL does not allow portability of unused exemption to surviving spouse | | Portability (federal) | Yes — surviving spouse can port deceased spouse's unused federal exemption (Form 706 required within 9 months) | | Illinois gift tax | None — IL imposes no gift tax; lifetime gifts reduce IL taxable estate | | Marital deduction (IL) | Yes — unlimited; transfers to US citizen surviving spouse qualify for IL marital deduction | | IL estate tax return | Illinois Form 700; due 9 months from date of death; 6-month extension available |

Illinois Estate Tax Rate Schedule

⚠ The Illinois estate tax is calculated using a tentative taxable estate method based on the federal taxable estate. The following rates are applied to amounts above the $4,000,000 exemption:

| ContentMarginal RateContentApproximate Tax on This Tier** | | --- | --- | --- | | $0 – $250,000 | 0.8% | $2,000 | | $250,001 – $500,000 | 1.6% | $4,000 | | $500,001 – $750,000 | 2.4% | $6,000 | | $750,001 – $1,000,000 | 3.2% | $8,000 | | $1,000,001 – $1,250,000 | 4.0% | $10,000 | | $1,250,001 – $1,500,000 | 4.8% | $12,000 | | $1,500,001 – $2,000,000 | 5.6% | $28,000 | | $2,000,001 – $2,500,000 | 6.4% | $32,000 | | $2,500,001 – $3,000,000 | 7.2% | $36,000 | | $3,000,001 – $3,500,000 | 8.0% | $40,000 | | $3,500,001 – $4,000,000 | 8.8% | $44,000 | | $4,000,001 – $5,000,000 | 10.4% | $104,000 | | $5,000,001 – $6,000,000 | 12.0% | $120,000 | | $6,000,001 – $7,000,000 | 12.8% | $128,000 | | Above $10,040,000 | 16.0% | (maximum marginal rate) |

⚠ Editor: Verify IL Estate Tax Rate Table Before Publication

The Illinois estate tax rate schedule is derived from the Illinois estate tax calculation methodology (35 ILCS 405/), which uses the federal taxable estate as a starting point and applies the Illinois rates to compute the state-only tax. The rates shown above are based on the standard published schedule — verify against the current Illinois Department of Revenue estate tax guidance and Form 700 instructions before publication.

The No-Portability Problem: Why $4M Matters So Much

| ContentWithout AB Trust PlanningContentWith AB Trust Planning** | | --- | --- | --- | | Couple: combined estate $7M; Spouse A dies first | All $7M passes to Spouse B via unlimited marital deduction; no IL tax at first death; Spouse A's $4M IL exemption WASTED | $4M into Credit Shelter (B) Trust at Spouse A's death; $3M to Spouse B's A Trust; Spouse A's $4M exemption USED | | Spouse B dies with $7M estate | Taxable: $7M – $4M = $3M; IL estate tax on $3M ≈ $263,000+ | B Trust: $4M outside Spouse B's estate (Spouse A's exemption used); A Trust: $3M – $4M = $0; IL estate tax = $0 | | Content$263,000+Content$0** | | Content$263,000+ in avoided IL estate tax** |

| ContentIL Tax WITHOUT AB Trust (at second death)ContentIL Tax WITH AB TrustContentApprox. Savings** | | --- | --- | --- | --- | | $5,000,000 | ~$65,000 | $0 | ~$65,000 | | $6,000,000 | ~$165,000 | $0 | ~$165,000 | | $7,000,000 | ~$265,000 | $0 | ~$265,000 | | $8,000,000 | ~$399,000 | ~$68,000 (only $4M-$8M split means ~$0 in B + $4M in A; A: $4M-$4M=$0) | ~$399,000 | | $10,000,000 | ~$770,000 | ~$200,000 (depends on split) | ~$570,000 |

No Illinois Gift Tax — A Powerful Planning Tool

Unlike the federal estate tax (which has a unified gift and estate tax), Illinois imposes no gift tax. Lifetime gifts reduce the Illinois taxable estate permanently — gifts made during life are not clawed back into the Illinois estate. This creates a significant planning opportunity:

• Annual gifts of $19,000/person/year (federal annual exclusion, 2026) are completely outside both federal and Illinois estate tax
• Larger lifetime gifts reduce the Illinois taxable estate even if they exceed the federal annual exclusion (though they do count against the federal lifetime exemption)
• Funding 529 college savings plans, paying tuition and medical expenses directly (federal gift tax exclusion for direct payments), and making charitable gifts all reduce the Illinois taxable estate

Illinois Gift Tax Strategy Example — $500,000 in Lifetime Gifts:

A single Illinois resident with a $5M estate makes $500,000 in lifetime gifts over 5 years ($100,000/year to 5 family members at $19,000 each + $5,000 each from lifetime exclusion). Their Illinois estate at death is reduced to $4.5M. Illinois estate tax on $500,000 above the $4M exemption ≈ $40,000. Compare to the $65,000+ tax on the full $5M estate without gifting. The gifts reduced Illinois estate tax by approximately $25,000. Over longer periods and with larger gifts, the savings compound substantially.

Illinois Residents With Federal Exemption Headroom — A Different Planning Frame

For Illinois residents with estates between $4M and $15M, the planning challenge is primarily the Illinois estate tax — federal estate tax does not apply at all on amounts below $15M (2026). This creates a unique planning environment:

| ContentFederal Estate Tax IssueContentIllinois Estate Tax IssueContentPrimary Planning Tool** | | --- | --- | --- | --- | | Under $4M | None | None | Trust for probate avoidance + incapacity; no estate tax planning required | | $4M – $8M | None — below $15M federal | YES — IL tax on amounts over $4M; up to ~$399K | AB trust to preserve both spouses' IL exemptions; lifetime gifting | | $8M – $15M | None — below $15M federal | YES — IL tax can reach $800K–$1.4M+ | AB trust + lifetime gifting + charitable giving + life insurance trust (ILIT) for liquidity | | Above $15M | YES — federal 40% on excess | YES — IL up to 16% | Comprehensive planning: AB trust + ILIT + GRATs + charitable vehicles + FLPs |

Filing the Illinois Estate Tax Return — Form 700

| ContentDetails** | | --- | --- | | When required | Estate exceeds $4,000,000; required even if no tax is owed (to claim the marital deduction or zero-tax filing) | | Form | Illinois Form 700 (Illinois Estate and Generation-Skipping Transfer Tax Return) | | Due date | 9 months from date of death | | Extension | 6-month extension available; but interest accrues on any tax owed | | Payment | Illinois estate tax due within 9 months; installment payment may be available for closely-held business interests | | Who files | The executor or administrator of the estate; or the Successor Trustee if estate is in a trust | | Where to file | Illinois Department of Revenue — Estate Tax Section |

✅ Verified Legal Data — March 2026

• 35 ILCS 405/ — Illinois Estate and Generation-Skipping Transfer Tax Act — confirmed

• Illinois estate tax exemption: $4,000,000 (flat since 2013; not indexed) — confirmed

• No Illinois portability — confirmed

• Illinois unlimited marital deduction for transfers to US citizen surviving spouse — confirmed

• No Illinois gift tax — confirmed; gifts reduce IL taxable estate

• Illinois Form 700; 9-month due date; 6-month extension available — confirmed

• IL estate tax rates: 0.8% to 16% graduated — ⚠ editor verify exact rate table from current IL Dept of Revenue guidance and Form 700 instructions

• Federal estate tax exemption: $15,000,000/person (PL 119-21, July 4, 2025) — confirmed

Series Navigation:

IL-1 → How to Avoid Probate in Illinois

IL-2 → Illinois Probate Process — Circuit Court

IL-3 → Illinois Small Estate Affidavit ($100,000)

IL-4 → Illinois Transfer on Death Instrument (TODI)

IL-5 → Illinois Revocable Living Trust

IL-6 → Illinois Estate Tax — The $4M Cliff No One Talks About

IL-7 → Illinois Probate Fees & Executor Compensation

IL-8 → Illinois Living Trust vs. Will

probatepedia.com · /illinois/estate-planning/estate-tax/ · IL-6 of 8 · v1.0 March 2026