Ask Terry Questions Federal and Illinois Inheritance Tax Details

Federal and Illinois Inheritance Tax Details

By Terry Savage on December 20, 2023 | Wild Card

My mother passed away this year and I am the estate executor. She has a will that requests equal distribution of her assets among her 4 children. She had a bank account that had no beneficiaries, which is in probate and will be distributed after the sale of her house.
There is another bank account with 1 of my siblings as a joint owner. I suggested to my sibling to transfer the money from the account to the estate account for equal distribution. All together her estate is <$1,500,000 (including the joint account) I know that the joint owner account bypasses probate, and it is my sibling's choice to distribute how he sees fit. He is saying that he will distribute on his own…with the reason being federal and state taxes. In Illinois I do not think there is any inheritance tax for Estates <$4million – is that true? …and … Do you know if there are any federal taxes on inheritance distributions? Thank you-

Terry Says

There are no federal estate taxes until your estate gets up to about $17 million. And you’re correct about Illinois estate taxes starting at $4 million.

Just so you know, your brother who is joint owner of that bank account, has absolutely no obligation to include it in a distribution of the estate, despite your mother’s stated wishes that all her assets be divided evenly! To me, it looks like he just wants to hang on to the money. But there is no tax consequence, since he can “gift” up to $17,000 in 2023 per person, without any gift tax obligation. And if there’s more money than that, he can distribute some this year, and more next year to avoid any tax issues. (In 2024, that annual exclusion jumps to $18,000.)

Also, as executor, you have the responsibility to work with the probate attorney to make sure the estate is cleared, and a final tax return is filed for the deceased. You are entitled to reasonable payment for your services in handling all of this!



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