Married couples in Illinois are being urged to review their estate plans because of a little-known gap between federal and state estate tax rules that could cost their heirs millions. Kravets Law Group, an Illinois business, real estate, and estate law firm, issued the alert this week, pointing out that while federal law allows a surviving spouse to use a deceased spouse's unused estate tax exemption, Illinois has no such portability provision.
The difference matters because Illinois imposes its own estate tax on estates above $4 million, even when no federal tax is due. In 2026, each person can pass $15 million free of federal estate tax, and spouses can combine unused amounts through portability. But because Illinois does not recognize portability, an exemption left unused at the first death is simply lost. For a couple with an $8 million estate who leave everything outright to the survivor, the first spouse's $4 million exemption goes unused, and the survivor's estate stands well above the state threshold, potentially triggering a state tax bill that could have been avoided.
"Many couples assume the federal rules carry over to Illinois, and that assumption is where the problem starts," said founding attorney Daniel Kravets. "A home, retirement accounts, and a business interest can add up to more than $4 million faster than most families expect. Married couples estate tax planning has to address the state tax directly."
The firm points to an AB trust, also called a credit shelter or bypass trust, as a potential solution. Such a trust divides a couple's assets at the first death: assets up to the first spouse's exemption fund a trust that the surviving spouse can benefit from during life, and those assets are not counted in the survivor's estate. The remaining assets pass to the survivor, so both exemptions are used and as much as $8 million can reach heirs without Illinois estate tax. Setting up an AB trust in Illinois must happen before the first spouse dies.
"An AB trust is not right for every couple, but for those near or above the threshold, it is often the most direct way to use both exemptions," Kravets added.
The implications extend beyond individual families. As Illinois estates grow in value, more couples may find themselves above the $4 million threshold without realizing it, and the lack of portability means the state tax can apply even when federal tax does not. For business owners and families with significant real estate or retirement assets, the cost of inaction could be substantial. The firm's warning highlights a planning gap that many couples may not discover until it is too late.
Kravets Law Group, founded in 2020 by Daniel Kravets, serves clients across Illinois, Pennsylvania, and New Jersey in real estate and property law, estate planning, and business and corporate law. The firm offers free consultations for couples who want to review their estate plans in light of the Illinois estate tax.
