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, according to Kravets Law Group, a Chicago-based estate law firm. Federal law allows a surviving spouse to use a deceased spouse’s unused estate tax exemption, a feature known as portability. Illinois, however, has no portability provision, so a couple with a basic plan can lose one spouse’s $4 million state exemption entirely.
The implications are significant for couples whose assets—including a home, retirement accounts, and a business interest—exceed $4 million. In 2026, each person can pass $15 million free of federal estate tax, and spouses can combine unused amounts through portability. Illinois applies its own estate tax to estates above $4 million, meaning an estate can owe state tax even when no federal tax is due. Because Illinois has no portability, an exemption left unused at the first death is gone. For example, if a couple with an $8 million estate leaves 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.
“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 strategy to address the gap is an AB trust, also called a credit shelter or bypass trust, which 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 firm’s warning comes as part of its broader estate planning practice, which serves clients across Illinois, Pennsylvania, and New Jersey. The firm was founded in 2020 by Kravets.
