Illinois Decoupling: estate plans prepared prior to 2006 should be reviewed

Changes in one’s family and financial situation as well as changes in tax laws often necessitate amending an estate plan. Beginning on January 1, 2009, there is one change in federal and State of Illinois estate tax laws that could have a detrimental impact on some existing estate plans if not addressed.
 
Historically, the payment of Illinois’ (and most other states’) estate tax was linked to the payment of federal estate tax. Thus, estate plans were drafted to defer the payment of federal estate tax until the death of the surviving spouse, which also resulted in the deferral of the payment of Illinois estate tax. However, a few years ago, Illinois “decoupled” from the federal tax system. As a result of such decoupling, beginning January 1, 2009, unless certain provisions are included in an estate plan, the situation could arise where federal estate tax is deferred until the death of the surviving spouse, but Illinois estate tax is payable upon the death of the first spouse. The vast majority of estate plans prepared by us beginning in late 2005 and thereafter address this issue; however, those executed before 2005, whether prepared by us or another firm, would most likely not.
 
While we and other Illinois attorneys were hopeful that Illinois would amend its laws to correct this problem, our contacts in Springfield have advised us that, at least for the near future, the legislature does not plan on doing so. Therefore, we recommend that all estate plans prepared prior to 2006 be reviewed to determine if a change is necessary to address Illinois decoupling. If this is something you desire, then please contact me to arrange a review of your estate plan. For more information, please contact Marty Ryan at (312) 840-7060 or mryan@burkelaw.com.