The recently enacted One Big Beautiful Bill Act (OBBBA) has brought significant changes to federal estate tax law, but Illinois families may be overlooking a critical gap at the state level. Kravets Law Group, an Illinois business, real estate, and estate law firm, is advising clients not to confuse the federal estate tax landscape with the state's. Signed into law on July 4, 2025, the OBBBA permanently set the federal estate, gift, and generation-skipping transfer tax exemption at $15 million per person beginning January 1, 2026, indexed annually for inflation. The Illinois estate tax exemption, however, remains at $4 million—creating an $11 million gap that many families overlook when reviewing their plans.
Before the OBBBA, the federal exemption was scheduled to drop from $13.99 million per person in 2025 to roughly $7 million in 2026 under the sunset provisions of the 2017 Tax Cuts and Jobs Act. The new law eliminates that scheduled rollback and locks in the higher exemption without a sunset date, meaning married couples can generally pass up to $30 million tax-free at the federal level starting in 2026. While this is largely good news for wealthy families with federal estate tax exposure, Kravets Law Group warns that clients may mistakenly assume the problem is solved.
Illinois is one of only twelve states (plus the District of Columbia) that imposes its own estate tax. The state's $4 million exemption has not moved in years, is not indexed for inflation, and is not portable between spouses. This means that if the first spouse to pass away does not use their exemption through careful planning, it is lost. Illinois also applies a "cliff" structure: once an estate crosses the $4 million line, the tax is calculated on the entire estate value rather than only the amount above the exemption. For families with estates between $4 million and $15 million, that structure creates a situation where no federal estate tax is owed but significant Illinois estate tax still applies. The gap is especially notable for Illinois business owners, farm families, and long-term homeowners whose real estate has appreciated substantially over the years.
Founding attorney Daniel Kravets emphasized that the permanence of the federal exemption does not eliminate the case for proactive planning. "No sunset doesn't mean no change," he said. "Any tax law can be amended down the road, and state law is its own moving target. Families who build flexibility into their plans now are in a far better position than those who assume the current rules will hold forever." Several strategies remain especially relevant for Illinois families navigating the state-federal gap, including charitable giving, conservation easements, and carefully structured business entities that can further reduce exposure depending on the family's goals.
The OBBBA's changes to federal estate tax law do not affect the planning conversation for most Illinois clients. Kravets added, "The state-level rules should still drive the plan. We recommend that anyone who hasn't reviewed their estate documents in the last few years do so, because what worked five years ago may not be the right answer today." For more information on how the One Big Beautiful Bill estate tax changes and the current federal estate tax 2026 exemption interact with Illinois law, families are encouraged to consult with a qualified estate planning attorney.
