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Taxes And Death

This is Dial Law with information on taxes at death. Some of this information may not be applicable if the deceased did not or the executor or administrator does not, live in Illinois. In that situation, we suggest you contact your local county bar association.

When an Illinois resident dies, the estate may have taxes deducted from its value before distribution to beneficiaries. These may include federal estate taxes, Illinois estate taxes, death taxes in other states or nations, and federal and state income taxes. The size of the estate or the amount of income usually determines what taxes must be paid.

The filing requirements for the federal estate tax returns are based on the gross estate value for federal purposes, that is, total assets located in Illinois and elsewhere being above certain levels. These levels are $325,000 for one who dies in 1984, $400,000 for 1985, $500,000 for 1986, and $600,000 thereafter.

As an example, if the estate of a person who dies in 1985 exceeds $400,000, the executor or administrator must file a federal estate tax return to determine whether taxes are due. Both the federal and Illinois returns are due nine months after date of death. Although a federal estate tax return will be required, no federal estate tax is imposed on property to a surviving spouse. In connection with estates of individuals who died after December 31, 1982, if no federal estate tax is payable, no Illinois estate tax will be imposed. If a federal estate tax is imposed an Illinois estate tax will be payable equal to the federal credit for state death taxes.

In addition, other states or other nations may have legal right to impose death taxes on parts of the estate located within their borders, or may impose a tax equal to their proportionate share of the state death tax credit allowed by the federal government.

Finally, income taxes also must be paid. The executor or administrator of the estate must file decedent's final income tax returns with federal and state authorities and pay the taxes due. If property in the estate continues to produce income, for example, from bank accounts or stocks in excess of the $600 per year estate exemption, the executor or administrator of the estate may have to file additional returns on that continuing income. All income earned, in excess of exemptions, whether by an individual before death or his estate after death, is reportable on the appropriate federal or state income tax return.