Why Should You Prepare Now for 2026 Estate Tax Changes? | Illinois

Estate planning is rarely ever a “one-and-done” task. Estate plans must be revisited whenever there is a significant change in your life, including marriage, divorce, birth, a change in financial status, or a change in residence. Estate plans should also be updated when federal or state laws change.

The Tax Cuts and Jobs Act of 2017 includes exemptions that expire in 2026. Under the TCJA, the lifetime estate and gift tax exemptions were significantly increased, but they will expire on January 1, 2026, unless new legislation leaves them in place. This means Illinois residents should review their current estate plans to determine whether changes need to be made. Those who fail to capitalize on the current exemption could see a significant financial impact. 

If these 2026 estate tax changes could potentially affect you and how you structure your estate plan, it could be extremely beneficial to speak to a knowledgeable Naperville, IL estate planning lawyer from Gierach Law Firm. Attorney Denice Gierach will ensure your estate plan remains just as effective five, ten, or twenty years from now as it is today.  

What Are the Actual Amounts at Stake if the TCJA Expires?

The current gift tax exemption amounts under the TCJA are $13.61 million for an individual and $27.22 million for a married couple. If these exemptions expire, they will be returned to the pre-TCJA amounts of $7 million for an individual and $14 million for a married couple.

The federal estate tax rate currently stands at 40 percent. With the individual exemption reduced to $7 million, a potential tax liability of up to $2.8 million, or $5.6 million for a married couple could occur. It is beneficial to lock in a permanent tax advantage now to avoid losing those benefits should the TCJA revert.   

Are These Tax Benefits Only for the Super-Wealthy?

While the TCJA certainly benefits wealthy individuals, it also applies to the mid-affluent, who are anticipating a significant growth in assets. Assets have had an average annual return of 7.3 percent over the past three decades. This rate effectively doubles the value of an estate every decade.

Thus, a couple with a $10 million estate could see those assets increase well beyond the future exemption thresholds. This means that individuals and couples must anticipate whether their current asset worth will increase over the next few years in order to take advantage of the TCJA before it expires.    

Techniques and Structures to Minimize Estate Tax Consequences Regardless of Your Tax Bracket

Even those who do not fall into the “ultra-wealthy” or even “mid-wealth” categories, can take advantage of specific estate planning techniques, including:

• Charitable Remainder Trusts (CRTs) support charitable causes while providing the grantor with income and tax benefits.
•  Grantor Retained Annuity Trusts (GRATs) allow the grantor to transfer his or her assets into a trust that pays the grantor a yearly annuity for two to ten years. Once the trust expires, the grantor’s beneficiaries will receive the remaining assets.
• Intentionally Defective Grantor Trusts (IDGTs) designate a trust as “intentionally defective,” allowing the grantor to separate income tax responsibility from gift tax and estate tax implications.
• Qualified Personal Residence Trusts (QPRTs) allow the grantor to transfer a primary or secondary residence into a trust, significantly reducing the gift tax consequences.
• Spousal Lifetime Access Trusts (SLATs) allow one spouse to support the other while still achieving tax savings. A SLAT transfers assets into an irrevocable trust that benefits a spouse and possibly other family members as well.

Contact a Naperville, IL Estate Planning Lawyer

Before the TCJA expires, it is essential that you speak to a knowledgeable Naperville, IL estate planning lawyer who can help you determine whether the expiration of those benefits will affect you and your family. When you choose the Gierach Law Firm, you will benefit from attorney Denice Gierach’s education as a lawyer, CPA, and master’s degree in management, as well as her experience as a lawyer and a business owner. The unique approach to client service you receive at Gierach Law Firm ensures your estate plan achieves all your goals. Call 630-228-9413 today to schedule an appointment.