Klein, Thorpe and Jenkins, Ltd.
Estate Planning
Estate Planning

Estate Planning Lawyers Provide Guidance for Handling Gift Tax in Illinois

Advising Illinois residents on estate planning and gift taxes

The ability to gift money or assets to your loved ones and the charitable organizations of your choice may provide you with a source of great pride. But Illinois residents should know about state and federal rules and regulations regarding gifts and gift taxes and how they may play a role in your estate plan. Klein, Thorpe & Jenkins, Ltd. has the knowledge and experience to assist clients in Chicago and the surrounding area with all aspects of making monetary gifts or gifts of other assets, documenting gift transfers, and preparing related federal and state tax returns.

Understanding estate and gift tax in Illinois

Illinois estate tax guidelines differ from those of the federal government. Here are some key differences of which Illinoisans should be aware:

  • In January 2013, the Illinois estate tax exemption was raised to $4 million. The highest possible tax rate for estates larger than $4 million is 16 percent.
  • The 2013 federal estate tax exemption is $5.25 million, and the top federal tax rate is 40 percent.
  • While Illinois does not levy taxes on lifetime gifts, the federal government does.
  • Federal estate taxes are indexed for inflation, but Illinois estate taxes are not. Federal estate taxes have increased by $250,000 since 2011 because of inflation.
  • The current annual maximum gift that may be transferred by one individual to another is $14,000. For example, each parent may gift a child with $14,000 of personal income, for a total of $28,000 in one year. The child does not have to pay taxes on this gift. However, the parents are required to pay any state and federal taxes on the income before they transfer the money to the child.

Providing guidance in gifting issues

There are many factors that may affect your decision of whether to gift money or other assets to another individual. These may include:

  • Your economic standing or that of the recipient
  • Your health or that of the recipient
  • Your age or that of the recipient
  • Family environment
  • Your emotional health or that of the recipient
  • Capital gains
  • Income tax brackets

We can determine the most beneficial gifting strategy for your circumstances and provide individual and fiduciary taxation advice.

What is a generation-skipping tax?

A generation-skipping transfer may meet one of the following criteria:

  • The transfer of money or other assets to a relative either two or more generations below the transferor, such as from a grandparent to a grandchild
  • The transfer of money or other assets to a non-relative who is at least 37 ½ years younger than the transferor, such as from a godparent to a godchild who is not related by blood

Congress has set a generation-skipping tax exemption of $5.25 million, the same as the federal estate tax exemption. However, any generation-skipping transfers over that amount may incur a 35 percent tax.

The rules and regulations pertaining to the generation-skipping tax are very complicated. Other options may also be available, such as perpetual trusts or dynasty trusts. It is important to obtain the advice of skilled attorneys who are well versed in Illinois state and federal laws regarding estate planning. We want to protect you and your loved ones from being hit with exorbitant gift taxes.

Contact experienced Chicagoland gift tax and estate planning attorneys today

Contact Klein, Thorpe & Jenkins, Ltd. today in Chicago at 312.984.6400, in Orland Park at 708.349.3888 or online to discuss how to effectively manage gift taxes and how transfers can fit into your comprehensive estate plan.

For questions regarding Estate Planning, please contact Scott E. Nemanich


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