The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently sets the federal estate, gift, and generation-skipping transfer tax exemption at $15 million per person, indexed for inflation, starting January 1, 2026. While this eliminates the scheduled reduction to roughly $7 million that would have occurred under the 2017 Tax Cuts and Jobs Act, Kravets Law Group warns that Illinois families should not overlook the state's estate tax, which remains at $4 million and is not indexed for inflation.
According to Kravets Law Group, an Illinois business, real estate, and estate law firm, the $11 million gap between the federal and state exemptions means many families who are exempt from federal estate tax may still owe significant Illinois estate tax. Illinois is one of only twelve states plus the District of Columbia that imposes its own estate tax, and its $4 million exemption 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. Additionally, Illinois applies a "cliff" structure: once an estate crosses the $4 million line, the tax is calculated on the entire estate value, not just the amount above the exemption.
"This is a significant change, and it's mostly good news for families with federal estate tax exposure," said founding attorney Daniel Kravets. "The risk we're watching is that clients hear the headline, assume the problem is solved, and forget that Illinois still has its own estate tax—one that kicks in at a much lower number and affects far more families than the federal tax ever did."
For families with estates between $4 million and $15 million, this 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. Kravets notes 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 relevant for Illinois families navigating the state-federal gap, including charitable giving, conservation easements, and carefully structured business entities. Kravets Law Group recommends that anyone who hasn't reviewed their estate documents in the last few years do so, as what worked five years ago may not be the right answer today. The firm offers complimentary consultations for individuals and families who want to review how the One Big Beautiful Bill estate tax changes and the current federal estate tax 2026 exemption interact with Illinois law under their specific circumstances.
