Will Your Loved Ones Have to Pay an Inheritance Tax?

Inheritance vs. Estate Taxes: What’s the Difference?

Before we dive into the specific rules for Illinois and Missouri, it’s important to distinguish between inheritance taxes and estate taxes.

• Inheritance Tax: This is a tax imposed on beneficiaries who receive assets from a deceased person’s estate. The tax rate often depends on the beneficiary’s relationship to the deceased.

• Estate Tax: This is a tax imposed on the overall value of the deceased person’s estate before any distributions are made to beneficiaries.

Illinois Estate & Inheritance Taxes

Estate Tax

Illinois does not have an inheritance tax, but it does impose an estate tax. As of 2025, the Illinois estate tax applies to estates valued over $4 million.

• Exemption Limit: The first $4 million of an estate is exempt from taxation.
• Tax Rates: Illinois estate tax rates range from 0.8% to 16%, depending on the size of the estate.

Important Considerations

• Marital Deductions: Estates left to surviving spouses are typically exempt from estate taxes.
• Trust Planning: Establishing trusts can be an effective way to reduce the taxable value of an estate and protect your assets from unnecessary taxation.

Missouri Estate & Inheritance Taxes

Estate Tax

Good news for Missourians: Missouri does not impose an estate tax. In 2010, the state repealed its estate tax, so residents are not subject to state-level estate taxes.

Inheritance Tax

Missouri does not have an inheritance tax either. However, beneficiaries may still be subject to federal estate taxes if the estate exceeds the federal exemption limit.

Federal Estate Tax Considerations

As of 2025, the federal estate tax exemption is approximately $12.92 million per individual. Estates exceeding this threshold may be subject to a federal estate tax rate of up to 40%.

Strategies to Reduce Estate Tax Liability

Regardless of your state’s tax rules, proactive estate planning can help minimize the tax burden on your loved ones.

Here are some strategies to consider:

1. Gifting During Your Lifetime: Utilize the annual gift tax exclusion to reduce the size of your taxable estate.
2. Establish Trusts: Trusts can help manage the distribution of your assets and reduce tax liability.
3. Charitable Contributions: Donating to charitable organizations can lower the taxable value of your estate.
4. Regular Estate Plan Reviews: Keep your estate plan updated to reflect changes in tax laws and personal circumstances.

Conclusion

While Missouri residents are not subject to state estate or inheritance taxes, Illinois residents need to be mindful of the state’s estate tax for estates over $4 million.

Understanding these tax rules and planning accordingly can ensure your loved ones are protected from unexpected financial burdens.



Taking the time to plan now will provide peace of mind and security for your family in the future.