Taxes are something that even death cannot help you avoid. When you die, your estate is subject to estate taxes in two ways. Your heirs may have to pay taxes at the federal and state levels. These two types of estate taxes vary greatly, so it is important to understand them both.
In many cases, though, Forbes explains that you can plan accordingly and minimize your tax liability at both levels. You can create special trusts or leave assets as gifts in some cases to lower the value of your estate and therefore reduce or eliminate your tax liability. However, to do that, you need to understand the tax laws and know if you are even subject to taxation at each level.
Federal estate tax
In most cases, you will not have to worry about the federal estate tax because it only applies to those with a value of $11.58 million or more. Most people have estates valued at less than that limit and avoid taxation.
State estate tax
Not every state has an estate tax, but Illinois happens to be one of them that does. The estate tax limit is much lower at the state level than it is at the federal level. In Illinois, you will face taxation if your estate is worth at least $4 million.
Common changes
Do note that estate tax laws often change. There was just a recent change in federal laws and the value limit will continue to change each year under the new law. States also may change their laws from year to year.
