Changes affecting estate planning for same-sex married couples in Illinois

On November 20, 2013, Illinois Governor Pat Quinn signed Senate Bill 10, allowing same-sex couples to marry, making Illinois the 16th state in the country to legalize same-sex marriage, according to the governor's press release. The new law takes effect June 1, 2014. The law requires that all Illinois laws applicable to marriage apply "equally to marriages of same-sex and different-sex couples and their children" and gives them the "same benefits, protections, and responsibilities under law." The law also provides for the voluntary conversion of a civil union to a marriage. These changes will affect estate planning for same-sex couples.

Surviving spouses are accorded special rights under Illinois probate law. Some examples include the "spouse's award," an allowance of not less than $20,000 for temporary support for a period of nine months after the death of a spouse, and the spouse's right to make an election against the will, permitting a surviving spouse to renounce the provisions of a testator spouse's will and elect to take a substantial portion of the deceased spouse's estate.

Estate tax planning considerations for married couples primarily impact larger estates, as the Illinois estate tax exemption was recently increased to $4 million for the estates of individuals who die in 2013 and thereafter. There are estate tax benefits afforded to married couples under state law. For example, Illinois estate tax law permits a "Q-TIP" election which is larger than the federal Q-TIP election for "qualified terminable interest property" - certain property that passes from a deceased spouse in which the surviving spouse has a qualifying income interest for life.

Under the federal tax code, the estate and gift tax laws provide benefits to married couples, most notably an unlimited marital deduction, which permits spouses to transfer an unrestricted amount of assets between themselves during their lifetimes or at the death of the transferor, without incurring tax liability.

In addition, recent tax rulings issued by the U.S. Department of the Treasury and the Internal Revenue Service provide that same-sex couples who are legally married in jurisdictions that recognize same-sex marriages will be recognized as legally married for "all federal tax purposes, including income and gift and estate taxes." The ruling applies to such couples even if they move to a different state that does not recognize same-sex marriages.

The ruling applies to all federal tax provisions where marriage is a factor, including:

  • Contributing to an IRA.
  • Claiming personal and dependency exemptions.
  • Employee benefits.
  • Claiming the earned income tax credit or child tax credit.
  • Taking the standard deduction.
  • Filing status.

Estate planning can be a complex process and tax laws are subject to frequent changes. Individuals desiring assistance in these matters should consult with an experienced estate planning attorney or other tax professional who stays current in this field in order to ensure that it is done correctly.

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