Estate planning rules in Illinois
Key takeaway
Illinois estate planning rules include an estate tax filed with the Attorney General and payable to the State Treasurer, and a body of appellate law on when the state may tax a trust. An Illinois appellate court held that a grantor's Illinois residence was not a sufficient connection to tax a trust that was administered and held in Maryland.
Estate tax filing
Illinois estate tax returns are filed with the Attorney General. Estate tax payments, interest and penalties are paid to the State Treasurer.
Illinois says an inheritance tax release may be necessary for a decedent who died before a statutory cutoff date.
Resident trusts
Under the Illinois Income Tax Act, an irrevocable trust is an Illinois resident trust if its grantor was domiciled in Illinois when the trust became irrevocable.
When the state may tax a trust
The Illinois appellate court said an inter vivos trust has a more attenuated connection to a state than a testamentary trust, because probate of a will in a state court does not create it.
The court described a decision by the Connecticut Supreme Court that found the critical due process link for taxing an inter vivos trust was a noncontingent beneficiary resident in the state during the tax year.
The court listed factors including the provisions of the trust instrument, the residence of the trustees, the residence of its beneficiaries, the location of the trust assets and the location where the trust's business is to be conducted.
The Autonomy Trust decision
The court found that the grantor's Illinois residence was not a sufficient connection to satisfy due process. The trust was administered in Maryland, and its assets were in the trustee's exclusive possession and control there.
The court held that Illinois lacked sufficient contacts with the trust to satisfy due process, so the Illinois income tax imposed on it was unconstitutional.
Thresholds and rates change. Check the state's own current figures.