Kravets Law Group, a Chicago-based firm serving Illinois, Pennsylvania, and New Jersey, is warning married couples about a costly gap in Illinois estate tax law: the state does not permit portability of the estate tax exemption between spouses. This means that when the first spouse dies, any unused portion of their $4 million Illinois exemption is lost, potentially resulting in a significant tax bill at the second death.
At the federal level, portability allows a surviving spouse to inherit the deceased spouse’s unused estate tax exemption, effectively shielding up to $30 million for a couple in 2026, provided a timely estate tax return is filed. Illinois, however, offers no such mechanism. If all assets pass outright to the surviving spouse, the first spouse’s $4 million exemption is wasted, leaving only the survivor’s $4 million to cover the combined estate.
The financial impact is magnified by Illinois’ estate tax cliff: once an estate exceeds $4 million, the tax is calculated on the entire estate, not just the excess. For example, an Illinois couple with $8 million in assets who rely on outright transfers could face a state estate tax bill of several hundred thousand dollars at the second death—an outcome that proper planning can avoid entirely.
The standard solution is a credit shelter trust, also known as an AB trust or bypass trust. When the first spouse dies, up to $4 million in assets can be placed in a trust for the surviving spouse’s benefit. The survivor can access the assets during their lifetime, but the trust assets are not included in their taxable estate at death. This preserves both spouses’ exemptions, shielding $8 million from Illinois estate tax rather than $4 million.
Beyond tax savings, credit shelter trusts offer non-tax benefits: they can protect assets from creditors, preserve wealth for children from a prior marriage, and prevent assets from being redirected if the surviving spouse remarries. For blended families or those concerned about a surviving spouse’s decision-making, these protections are often as important as the tax planning itself.
“There’s a clear and well-established way to plan around this gap in state and federal law,” said founding attorney Daniel Kravets. “The catch is that the planning has to happen while both spouses are alive and able to sign documents. Once the first spouse passes away, the available planning options start to narrow.”
Kravets Law Group was founded by Daniel Kravets, who was raised outside Philadelphia by a Russian immigrant family and built his practice around the belief that legal representation should feel like a partnership, not a transaction. The firm offers complimentary consultations for married couples who want to review their estate plans and determine whether they are positioned to preserve both spouses’ Illinois exemptions. For more information, visit https://www.kravetslawgroup.com.
