The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently set the federal estate, gift, and generation-skipping transfer tax exemption at $15 million per person beginning January 1, 2026, indexed annually for inflation. While this eliminates the scheduled drop to roughly $7 million per person under the 2017 Tax Cuts and Jobs Act sunset provisions, Kravets Law Group warns that Illinois families must not overlook the state's far lower estate tax exemption.
Illinois imposes its own estate tax with a $4 million exemption that has not been updated in years, is not indexed for inflation, and is not portable between spouses. This creates an $11 million gap between federal and state exemptions. For married couples, the federal exemption allows passing up to $30 million tax-free at the federal level, but Illinois estates exceeding $4 million may still owe significant state estate tax. The state's "cliff" structure means that once an estate crosses the $4 million line, the tax is calculated on the entire estate value, not just the excess.
"This is a significant change, and it's mostly good news for families with federal estate tax exposure," said founding attorney Daniel Kravets. "The risk we're watching is that clients hear the headline, assume the problem is solved, and forget that Illinois still has its own estate tax—one that kicks in at a much lower number and affects far more families than the federal tax ever did."
Illinois is one of only twelve states plus the District of Columbia that imposes its own estate tax. For families with estates between $4 million and $15 million, the federal exemption provides no relief from state taxes. This is especially relevant for Illinois business owners, farm families, and long-term homeowners whose real estate has appreciated substantially.
Kravets emphasizes that the permanence of the federal exemption does not eliminate the need for proactive planning. "No sunset doesn't mean no change," he said. "Any tax law can be amended down the road, and state law is its own moving target. Families who build flexibility into their plans now are in a far better position than those who assume the current rules will hold forever."
Several strategies remain relevant for Illinois families, including charitable giving, conservation easements, and carefully structured business entities to reduce exposure. Kravets Law Group recommends that anyone who hasn't reviewed their estate documents in the last few years do so, as what worked five years ago may not be optimal today.
