Married couples in Illinois are being urged to review their estate plans because of a critical mismatch between federal and state tax law. Federal rules allow a surviving spouse to use any unused estate tax exemption from the first spouse to die, a feature known as portability. Illinois, however, has no such portability, meaning that if the first spouse's $4 million state exemption is not used, it is lost forever. For couples with estates that exceed the Illinois threshold, the result can be an unexpected state tax bill even when no federal tax is owed.
The stakes are higher than many families realize. In 2026, the federal estate tax exemption stands at $15 million per person, and spouses can combine unused amounts through portability. Illinois imposes its own estate tax on estates valued above $4 million. A couple with an $8 million estate that leaves everything outright to the survivor would waste the first spouse's $4 million exemption, leaving the survivor's estate well above the state threshold. According to Kravets Law Group, an Illinois business, real estate, and estate law firm, this gap is a common and costly oversight.
"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."
One solution is an AB trust, also called a credit shelter or bypass trust. At the first death, the trust divides the couple's assets: assets up to the first spouse's exemption fund a trust that the surviving spouse can benefit from during life, and those assets are excluded from 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 free of 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 tax savings. Without proper planning, families may be forced to sell assets, including a home or business interest, to pay state estate taxes. The firm notes that many couples overlook the Illinois threshold because it is much lower than the federal one. Regular reviews of estate plans can help ensure that both spouses' exemptions are preserved and that heirs receive the intended share of the estate.
