Estate Taxes, Probate, and Trusts
Knowing whether you are subject to estate taxes or if your estate must go through probate during your lifetime or after your death can significantly impact your family. Is a Trust necessary to avoid probate and protect against estate taxes? Let’s find out.
Probate Risks During Life and at Death
Probate is the legal process that settles your debts and distributes your assets after your death or during your incapacitation. The system exists because no one can sign your name. If you are incapacitated, a guardian is appointed to manage your financial affairs.
If you die with assets in your name, an executor is appointed to handle your estate. A will does not avoid probate; therefore, every will must be filed in court within 30 days of a person’s death.
A fully funded Living Trust avoids probate, which typically takes around 18 months. However, small estates can bypass probate by using an affidavit.
Small Estate Affidavit Changes
A Small Estate Affidavit transfers a deceased person’s estate to their heirs or beneficiaries, bypassing the probate process, provided it meets specific requirements.
If there is no conflict among the beneficiaries of a Will, or the lawful heirs if there is no Will, and the deceased did not own real estate, a state-approved affidavit handles the estate administration.
Recently, on August 15th, 2025, Illinois enacted a law to increase the small estate value limit from $100,000 to $150,000.
If someone passes away on or after August 15th, 2025, their heirs can avoid probate by using a Small Estate Affidavit, provided the specified conditions are satisfied.
The Current Estate Tax Laws
Although the recent OBBB Act establishes a permanent personal estate tax exemption of $15 million for those dying on or after January 1, 2026, Illinois’s exemption amount is much lower at $4 million.
While you might avoid federal estate tax, if you have invested or inherited significantly, your estate could approach Illinois’s taxable limit.
While the $4 million taxable threshold is more widely known, many people don’t realize that surpassing the $4 million limit in Illinois by just $1 results in their entire estate being taxed progressively.
For example, an estate valued at $4,040,000 will incur an estate tax of $238,800. Married couples with estates exceeding $4 million can avoid probate and protect up to $8 million in estate taxes by using an AB Living Trust.
Estate Planning is Everything
A D. A. Davidson survey found that 2/3 of Americans have no estate plan.
When we are young, we feel invincible. The last thing on our minds is death. The loss of loved ones and the physical and psychological effects of aging reinforce the reality of mortality. As a result, we spend our lives avoiding the inevitable and failing to prepare for it.
Estate planning is crucial, and understanding your projected estate value is essential.
Properly using a Living Trust for estates over $150,000 to avoid probate, and an AB Living Trust to protect against estate taxes, can save your family years of stress and a substantial amount in taxes.
Your Living Trust
At the end of your life or if you become incapacitated, your real estate, financial accounts, firearms, and other assets held in your name may need to go through probate.
- A Will is filed in probate. The rule is that no one can legally sign on your behalf. Therefore, all assets in your name are subject to the probate process, which averages 18 months and is costly.
- A Living Trust completely avoids probate. An AB Living Trust protects up to $8 million of an Illinois estate tax-free.
- Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as the beneficiary, subject to essential tax considerations.
- A Living Trust estate plan includes Health Care and Financial Power of Attorney documents. It also includes a Last Will and Testament. A Will is necessary for the guardianship of minor children and for transferring assets in your name out of Probate.
Contact us today for further information or visit Tuohy Law Offices now.
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312-559-8400
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Oakbrook Terrace, Illinois, 60181
This blog entry is for information and planning purposes. Therefore, it is not legal advice. Please do not use this blog as a substitute for legal advice, which depends on specific facts and laws in a particular jurisdiction. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader’s state, country, or other appropriate licensing jurisdiction.
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