Illinois and Massachusetts Estate Tax Planning Guide

Illinois taxes estates above $4 million and Massachusetts taxes estates above $2 million, far below the $15 million federal exemption for 2026. Massachusetts no longer has a cliff: since 2023, a $99,600 credit wipes out the tax on the first $2 million, so an estate just over the line pays only a little. Illinois has no true cliff either, but its interrelated calculation takes about 28.6% of each dollar just above $4 million, so a $5 million estate owes $285,714 even though no federal tax is due. Neither state lets a surviving spouse use the first spouse's unused exemption.

Why state estate tax matters when federal tax does not

Under the One Big Beautiful Bill Act, the federal basic exclusion is $15,000,000 per person for 2026, indexed for inflation afterward, and a surviving spouse can add a deceased spouse's unused federal exclusion through portability. A married couple can therefore pass about $30 million free of federal estate tax.

Twelve states and the District of Columbia still levy their own estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Most exempt far less than the federal amount. For every state's 2026 exemption and rate, see the table on our estate tax calculator page; the difference between estate and inheritance taxes is covered in inheritance tax vs. estate tax.

The Illinois $5 million figure is the Attorney General's published example; the other Illinois figures come from our calculator's approximation of the AG's method. Massachusetts figures use the statutory table and credit described below. All assume every asset is in the decedent's home state and no deductions.

How the Illinois estate tax works

The Illinois Attorney General administers the tax. Its Illinois estate tax fact sheet sets out the rules:

• Exclusion: $4,000,000. It is not indexed for inflation. Bills to raise it or tie it to the federal amount have been filed in the 2025–2026 General Assembly, but none had become law when this page was updated.
• The exclusion is a threshold, not a credit. Below $4 million, there is no tax. Above it, the tax is computed with an interrelated formula based on the old federal state death tax credit, and the AG provides an online calculator.
• Filing: Form 700 is required when the gross estate plus adjusted taxable gifts exceeds $4 million, even if no federal Form 706 is due.
• Lifetime gifts count toward the threshold. In the AG's example, a $3,000,100 estate with $1,000,000 of adjusted taxable gifts owes $28.
• Due date: nine months after death, paid to the Illinois State Treasurer. The AG grants extensions and recognizes federal extensions.
• Nonresidents and out-of-state property: the tax is first computed as if everything were in Illinois, then apportioned by the share of assets located in Illinois. The AG's example: a $5,000,000 estate split evenly between Illinois and Florida owes $142,857 to Illinois.
• No portability: the fact sheet states that federal portability does not apply to the Illinois tax.

The Illinois "bubble" just above $4 million

Just above the exclusion, the Illinois tax equals 40% of the amount over $4 million, but because the Illinois tax is itself deductible in computing the base, the net result is 40% ÷ 1.4 ≈ 28.6% of the excess:

• $4,100,000 estate: $100,000 × 28.57% ≈ $28,571
• $4,500,000 estate: $500,000 × 28.57% ≈ $142,857
• $5,000,000 estate: $1,000,000 × 28.57% = $285,714 (the AG's example)

That is not a cliff, since a $4,010,000 estate does not pay tax on the full $4,010,000, but the marginal rate in this range is far higher than the 16% top rate people usually quote. Every $100,000 of charitable bequests, deductible expenses, or lifetime gifts that brings an estate back toward $4 million saves about $28,600 of Illinois tax.

Illinois QTIP election

For deaths on or after January 1, 2009, an Illinois estate can make a QTIP election for Illinois purposes that differs from the federal one. That lets a married couple fund a trust for the surviving spouse with just enough property to keep the first estate at or under $4 million for Illinois purposes, while treating the rest as marital-deduction property. In the AG's example, a $13,610,000 estate with a surviving spouse and a $9,610,000 Illinois QTIP election owes no Illinois tax.

How the Massachusetts estate tax works now

Massachusetts rewrote its estate tax in 2023 (St. 2023, c. 50). According to the Department of Revenue's estate and inheritance tax procedures (AP 500), for deaths on or after January 1, 2023:

• Filing threshold: $2,000,000, not indexed for inflation.
• Credit: up to $99,600, which equals the tax on a $2 million estate, so estates of $2 million or less owe nothing.
• No cliff. Under the old law, an estate over the threshold (then $1 million) paid tax on its entire value. Now the credit absorbs the tax on the first $2 million, and only the excess effectively bears tax.
• Out-of-state property: a 2024 amendment (St. 2024, c. 206) changed how real estate and tangible property located outside Massachusetts is treated, and DOR has published simplified computation rules for deaths on or after August 1, 2025. Residents who own a second home in another state should work through DOR's current estate tax guide.
• No portability between spouses.

Massachusetts math, step by step

The tax uses the federal state death tax credit table as it stood at the end of 2000, applied to the taxable estate minus $60,000, then subtracts the $99,600 credit (M.G.L. c. 65C, §2A).

$3,000,000 taxable estate:

1. Adjusted taxable estate: $3,000,000 − $60,000 = $2,940,000
2. Table: $146,800 on the first $2,540,000, plus 8.8% of the $400,000 above it ($35,200) = $182,000
3. Subtract the credit: $182,000 − $99,600 = $82,400

$2,010,000 taxable estate: the table gives $100,320; minus $99,600 = $720, which is 7.2% of the $10,000 above $2 million. Under the pre-2023 cliff rules, the table applied to the whole estate with no offsetting credit, so this estate would have owed roughly $100,000.

Marginal rates start at 7.2% just above $2 million and reach 16% for adjusted taxable estates above $10,040,000.

Why $2 million catches ordinary households

A paid-off house in the Boston suburbs, two retirement accounts, and a life insurance policy can reach $2 million without anyone in the family considering themselves wealthy. Life insurance owned by the insured, retirement accounts, and the decedent's share of jointly owned property all count. Our calculator's Massachusetts setting runs the same table if you enter your own numbers.

Worked planning examples

Married couple in Massachusetts with $4 million

Both spouses' assets total $4,000,000, and each will leaves everything to the other outright.

• First death: everything passes to the spouse under the unlimited marital deduction. Massachusetts tax: $0.
• Second death: the survivor's estate is $4,000,000. Table: $280,400 − $99,600 credit = $180,800.

With a credit shelter trust: at the first death, $2,000,000 goes into a bypass trust for the survivor's benefit, and the rest passes outright. Each estate is taxed on $2,000,000, and each owes $0. Savings: $180,800, before any growth in the trust, which also stays outside the survivor's estate.

The plan only works if each spouse owns enough in their own name to fund the trust, so retitling joint accounts is often part of the job.

Illinois couple with an $8 million estate

The same structure applies in Illinois with a $4,000,000 trust.

• Everything to the survivor: second-death Illinois tax on $8,000,000 is about $680,600. Federal tax: $0, because $8 million is well under $15 million.
• $4 million bypass trust at the first death: each estate is taxed on $4,000,000, so Illinois tax is $0 at both deaths.

If the couple's assets are uneven, the Illinois-only QTIP election described above lets the executor fine-tune how much passes through the trust after death.

Illinois business owner with an $8 million estate

A single owner's estate is an $8,000,000 interest in a family company. Federal estate tax is $0. Illinois tax is about $680,600 with no planning.

If the owner transfers minority interests in an LLC to children during life, and a qualified appraisal supports a 30% discount for lack of control and marketability on the interests that remain, the estate's taxable value could fall to $5,600,000, and Illinois tax to about $413,200. Discounts must be supported by an appraisal and survive IRS and AG review; aggressive discounts on entities holding only passive assets are frequently challenged.

New York: the cliff that still exists

New York is the state with a true cliff. For 2026 the exclusion is $7,350,000, and an estate above 105% of that ($7,717,500) loses the exclusion entirely, according to the New York Department of Taxation and Finance. A $7,800,000 estate owes about $746,000 on the full amount, while a $7,350,000 estate owes nothing. A charitable bequest that brings the taxable estate back to $7,350,000 would cost $450,000 and save about $746,000.

Planning moves that work for Illinois and Massachusetts

Credit shelter trusts

Because neither state honors portability, a bypass trust is the single most valuable step for married couples with combined estates above one state exemption. For federal purposes, the executor can still elect portability on a timely Form 706 to carry over any unused federal exclusion.

Lifetime gifts

Massachusetts has no gift tax, and Connecticut is the only state that taxes gifts. Gifts of up to $19,000 per recipient in 2026 ($38,000 for a married couple) fall under the federal annual exclusion and do not use any lifetime exemption. Remember that Illinois counts adjusted taxable gifts toward its $4 million filing threshold, so large taxable gifts do not escape the Illinois calculation the way annual-exclusion gifts do. See how the gift tax works and the gift tax calculator.

Charitable bequests

Both states allow a deduction for charitable bequests. In Illinois's 28.6% band, a $100,000 bequest costs heirs about $71,400 after the tax saving. A charitable remainder trust can provide income during life and a deduction for the remainder at death.

Changing domicile

Moving your domicile to a state with no estate tax, such as Florida or New Hampshire, removes your intangible assets (brokerage accounts, retirement accounts, business interests) from your former state's tax. It does not remove real estate or tangible property located there: an Illinois condo or a Cape Cod house owned by a Florida resident is still subject to Illinois or Massachusetts estate tax under each state's nonresident rules. A domicile change must be real: driver's license, voter registration, homestead filing, where you spend your time, and where your doctors, clubs, and family ties are.

Holding out-of-state real estate in an entity

Some nonresidents hold vacation property through an LLC so the asset becomes an intangible interest rather than real estate in the other state. Whether that works depends on the state's rules and how the entity is respected; get advice from an attorney licensed in the state where the property sits.

Common mistakes

• Leaving everything outright to the surviving spouse and wasting the first spouse's $2 million or $4 million state exemption.
• Assuming the Massachusetts cliff still applies and making rushed gifts to get "under $2 million." Since 2023, an estate slightly over pays only on the excess.
• Ignoring Illinois's marginal rate just above $4 million. At about 28.6%, a modest charitable bequest or expense deduction can save more than expected.
• Forgetting life insurance. A policy you own is in your estate. An irrevocable life insurance trust can keep it out if the trust buys the policy, or if an existing policy is transferred to it more than three years before death.
• Filing late. Both returns are due nine months after death, even when no federal return is required.

Run your numbers

Use the estate tax calculator to see federal and state tax side by side for your state, and read estate tax planning strategies for federal techniques. More guides are collected in the estate planning hub.

This guide reflects Illinois, Massachusetts, New York, and federal rules for deaths in 2026 as published by those agencies. State laws change, and the Illinois figures other than the AG's own examples are approximations, so confirm your estate's numbers with the AG's calculator or Massachusetts DOR forms and an estate planning attorney before acting.