• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Home
  • Our Firm
    • About Our Firm
    • Attorney and Staff Profiles
    • Communities We Serve
      • Cook County
        • Barrington
        • Glenview
        • Northbrook
        • Skokie
      • Lake County
        • Gurnee
        • Lincolnshire
        • Riverwoods
        • Vernon Hills
        • Waukegan
  • Services
    • Asset Protection & Business Planning
    • Estate and Gift Tax Figures
    • Estate Planning Services
    • Family-Owned Businesses & Farms
    • Financial Planning Assistance
    • Incapacity Planning
    • IRA & Retirement Planning
    • Legacy Planning
    • LGBTQ Estate Planning
    • Pet Planning
    • SECURE Act
    • Special Needs Planning
    • Trust Administration & Probate
  • Resources
    • Client Resources
      • Free Seminars
      • Estate and Gift Tax Figures
      • Free Estate Planning Worksheet
      • Is Your Estate Plan Outdated?
      • Probate Resources
        • Glenview Probate
        • Lake Forest Probate
        • Lincolnshire Probate
        • Northbrook Probate
        • Vernon Hills Probate
        • Waukegan Probate
    • Frequently Asked Questions
      • Asset Protection
      • Business Succession Planning
      • Estate Planning
      • Families Without an Estate Plan
      • Financial Planning Assistance
      • Legacy Wealth Planning
      • LGBTQ Estate Planning
      • Probate
      • Trust Administration & Probate
      • Trusts
    • Legacy Wealth Planning
    • Published Books
    • Reports
      • Advanced Estate Planning
      • Basic Estate Planning
      • Estate Planning for Niches
      • Trust Administration
  • BLOG
  • Contact Us
  • Review Us

Hedeker Law

Illinois Estate Planning Attorneys

Connect with us today(847) 913-5415

Attend a Free Seminar
Home / Estate Tax / Waukegan Estate Planning Attorneys Explain Gift and Estate Taxes

Waukegan Estate Planning Attorneys Explain Gift and Estate Taxes

November 28, 2017Estate Tax

Waukegan estate planning attorneysEstate planning, when done correctly, should accomplish more than just deciding how you want your estate assets to be distributed when you are gone.  It should also protect and help grow your assets while you are alive and plan for those assets to help provide for loved ones after your death. One important factor in accomplishing those goals is the impact gift and estate taxes will have on your estate. To help you understand that impact, the Waukegan estate planning attorneys at Hedeker Law Ltd. explain gift and estate taxes.

What Is the Federal Gift and Estate Tax?

The federal gift and estate tax is essentially a tax on the transfer of wealth, levied at the time of a taxpayer’s death. Both transfers made during a taxpayer’s lifetime in the form of a gift and transfers made at the time of death in the form of gifts made pursuant to the terms of a Will or an intestate inheritance are subject to the tax. Historically, the estate tax rate fluctuated on a yearly basis; however, with the passage of the American Taxpayer Relief Act of 2012 (ATRA) the tax rate was permanently set at 40 percent. Before any deductions or adjustments to your estate’s value, that means your estate could lose 40 percent of its value to Uncle Sam because of a federal gift and estate tax obligation.

How Is the Gift and Estate Tax Calculated?

To determine your estate’s federal gift and estate tax obligation, you add the value of all qualifying gifts made during your lifetime and the value of all estate assets owned at the time of your death. For example, imagine that you made gifts during your lifetime worth a combined total of $3 million. At the time of your death, you also owned assets valued at $5 million. The combined total of $8 million would potentially be subject to federal gift and estate taxes. Without any further adjustments, your estate would lose $3.2 million as a result of federal gift and estate taxes!

The Lifetime Exemption

Fortunately, we do not stop there.  Every taxpayer is also entitled to make use of the lifetime exemption which is essentially a deduction taken prior to calculating the tax. Historically, the lifetime exemption limit fluctuated on a regular basis prior to the passage of the American Taxpayer Relief Act of 2012 (ATRA). In 2012, ATRA set the lifetime exemption limit at $5 million, to be adjusted annually for inflation. For 2017, the exemption is $5.49 million. This means that every taxpayer may deduct $5.49 million from their taxable estate before federal gift and estate taxes are levied on the estate. In our example above, for an estate valued at $8 million, it will be reduced to $2.51 million after deducting the lifetime exemption for the purpose of calculating your gift and estate taxes due. The federal gift and estate tax due, therefore, is reduced from $3.2 million to $1,004,000 after factoring in the lifetime exemption.

State Gift and Estate Taxes

Along with the impact federal gift and estate taxes will have on your estate, you may also need to take into account state gift and estate taxes. Several states, including Illinois, impose a state level gift and estate tax. It is imperative to take state taxation into account because the exemption amount is frequently much less than the federal exemption, increasing the likelihood of an estate incurring a tax obligation.  In Illinois, for instance, the exemption is only $3.5 million and does not change each year like its federal counterpart. The tax rate varies up to a maximum of 28.5 percent. Keep in mind as well that if you own property in another state, the estate tax laws of that state may impact any tax debt owed on that property. Always consult with an experienced estate planning attorney to ensure that you understand the impact federal and/or state estate taxes will have on your estate.

Contact Illinois Estate Planning Attorneys

Please feel free to download our FREE estate planning worksheet. If you have questions or concerns regarding gift and estate taxes, contact the experienced estate planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.

  • Author
  • Recent Posts
Dean R. Hedeker
Dean R. Hedeker
Dean Hedeker is a leading Chicago-area authority on estate and tax planning, business law and investments. A long-time resident of north suburban Lincolnshire, Dean has more than 35-years experience helping business owners and families grow, protect and pass on their hard-earned money through tax planning, estate planning and investment management services.
Dean R. Hedeker
Latest posts by Dean R. Hedeker (see all)
  • How Can I Terminate a Living Trust? - September 24, 2019
  • Is an AB Trust Right for My Estate Plan? - September 12, 2019
  • How Can I Include Philanthropy in My Estate Plan? - September 4, 2019

Primary Sidebar

FREE ESTATE PLANNING WORKSHEET

There's a lot that goes into setting up a comprehensive estate plan, but with our FREE worksheet, you'll be one step closer to getting yourself and your family on the path to a secure and happy future.

  • This field is for validation purposes and should be left unchanged.

Follow Us

  • Facebook
  • twitter
  • link
  • youtube

Testimonials

Client Review
September 8, 2020
    

Dean's knowledge is very comprehensive and current. He not only sees and understands the particular question but he puts it in the context my particular matter and to the overall business and tax environment. Dean has been my attorney for many (over 20) years. I am also an attorney but I would never make a tax, business or financial decision without his extraordinary advice and counsel.

default image
Raymond

Where We Are

LINCOLNSHIRE
1 Overlook Point, Suite 610,
Lincolnshire, IL 60069
Phone: (847) 913-5415

See Larger Map Get Directions

Blog Subscription

  • This field is for validation purposes and should be left unchanged.

Office Hours

Monday8:00 AM - 5:00 PM
Tuesday8:00 AM - 5:00 PM
Wednesday8:00 AM - 5:00 PM
Thursday8:00 AM - 5:00 PM
Friday8:00 AM - 5:00 PM

Map

hedeker_sidbr_map

Footer

  • Advantages of Working With Our Firm
  • About The American Academy
  • Privacy Policy
  • Disclaimer
  • Sitemap
  • Contact Us

Connect with Us

  • Facebook
  • twitter
  • link
  • youtube
footer-logo

Hedeker Law Ltd.
All Right Reseved.

Attorney Advertisement

© 2023 American Academy of Estate Planning Attorneys, Inc.