Married couples in Illinois are facing a significant and often overlooked estate tax burden because the state does not permit portability of the estate tax exemption between spouses. This divergence from federal law can result in a tax bill of several hundred thousand dollars for a couple with $8 million in combined assets, according to Kravets Law Group, an Illinois business, real estate, and estate law firm. The firm is calling attention to the issue as a critical planning gap that many families fail to address until it is too late.
At the federal level, portability allows a surviving spouse to inherit any unused portion of a deceased spouse's estate tax exemption. For 2026, a couple with a combined federal exemption of $30 million can shield the full amount even if all assets pass outright to the survivor, provided an estate tax return is filed on time after the first death. This mechanism is widely regarded as one of the most valuable tools in federal estate planning. However, Illinois offers no such provision. The state's estate tax exemption is currently $4 million per person, and it is lost at the first spouse's passing unless affirmative steps are taken during life to preserve it.
If a married couple's entire estate passes outright to the surviving spouse, the first spouse's $4 million exemption is wasted. The survivor is then left with only their own $4 million exemption to shield what is now a combined estate. The financial consequences are exacerbated by Illinois's estate tax structure, which applies a "cliff" once an estate exceeds $4 million. This means the tax is calculated on the entire estate rather than just the amount above the exemption. For a couple with $8 million in combined assets who rely on outright transfers, the state estate tax bill at the second death could reach several hundred thousand dollars—an outcome that proper planning can avoid entirely.
The standard solution is a properly structured credit shelter trust, often called an AB trust or bypass trust. When the first spouse passes away, a portion of their assets up to the $4 million Illinois exemption funds a trust for the benefit of the surviving spouse. The survivor can use the trust assets during their lifetime, but those assets are not considered part of their own taxable estate when they later pass. This preserves both spouses' $4 million exemptions, effectively shielding $8 million from Illinois estate tax rather than just $4 million. Credit shelter trusts also offer non-tax benefits, including protection from future creditors, preservation of wealth for children from a prior marriage, and prevention of asset redirection if the surviving spouse remarries.
"There's a clear and well-established way to plan around this gap in state and federal law," said founding attorney Daniel Kravets. "The catch is that the planning has to happen while both spouses are alive and able to sign documents. Once the first spouse passes away, the available planning options start to narrow." Kravets Law Group, a Chicago-based firm serving clients across Illinois, Pennsylvania, and New Jersey, offers complimentary consultations for married couples seeking to review their estate plans. The firm emphasizes that without proactive measures, many families unknowingly forfeit a substantial portion of their wealth to state estate taxes. For more information on the firm's estate planning services, visit https://www.kravetslawgroup.com.
