Estate Taxes in Illinois

The uncertainty surrounding the exemption amounts for Federal and Illinois estate taxes for 2012 and beyond has caused confusion for many clients. For 2012, the Federal estate tax exemption rises to $5.12 million (adjusted for inflation from the 2011 amount). After 2012, unless new laws are passed by Congress, the exemption amounts reverts to $1 million.
In Illinois , the exemption amount was increased to $3.5 million for 2012 and $4 million for 2013 and thereafter.
Therefore, in 2012, we have the same situation as in 2011, where an estate may be exempt from Federal estate tax, but subject to the Illinois estate tax.
Unless Congress extends the higher exemption amounts after 2012, 2013 could have estates subject to Federal estate tax and not subject to Illinois estate tax.
The bottom line is to have your plan reviewed to make sure that you are ready for any possibility.

Dissolving Your LLC Or Corporation

If you are looking to dissolve your Illinois LLC or Corporation, you may file Articles of Dissolution with the Secretary of State. This provides for a more orderly and official dissolution of the entity as opposed to not filing the annual report and waiting for an administrative dissolution. The forms are easy, inexpensive and provide for an address for service of process. The Business Corporation Act provides that "Dissolution of a corporation may be authorized by the unanimous consent in writing of the holders of all outstanding shares entitled to vote on dissolution. Dissolution pursuant to this Section does not require any vote or action of the directors of the corporation." 805 ILCS 5/12.10

Setting Up a New Business?

If you are setting up a new business, make sure you consider the type of structure that you will need. Your options include sole proprietorship, partnership, corporation and limited liability company. Each has unique tax consequences and requirements and all of them require careful consideration to make sure that you are starting on the right foot.

You will certainly save time and money by considering your options carefully before starting your business. You will also avoid running afoul of timely filing requirements. Call my office today.

Unintended Consequences of Self-Help Estate Planning

Many clients ask me: "Can't we just put one or more of our kids on our deed, so that they get the house when we die?"
What if one of your kids has trouble with creditors? What if they go bankrupt? You could lose your house in such a scenario. Placing your kids on the deed could jeopardize many things.

Another popular question: "Can't I just put one of my children on my accounts? When I die, they will know what to do as far as dividing it up among all of my kids."
If your kids got along with each other before your death, that might not last after you are gone.

Why leave things so important to chance? Consider a will or a trust and make everything certain. You may just save your family.

Deceased Spouse's Unused Exemption Amounts

Starting in 2011, any unused exemption amounts of a deceased spouse (up to $5 million) may be passed along to the surviving spouse, even if there was no estate planning. The new portability election allows estates of married taxpayers to pass along the unused part of their exclusion amount to their surviving spouse. However, to make the portability election, a Form 706 must be timely filed with the IRS, even if the form would not otherwise be required. Form 706 is due 9 months after the date of death, and an extension may be obtained for an additional 6 months (but must be requested prior to the original deadline).
Note: Returns are due on October 3, 2011 for spouses that died on January 1, 2011!

Employee or Independent Contractor? New IRS Program to the Rescue

The issue:  Is a person that does work for you or your company an employee or an independent contractor?

If you classify the person incorrectly as an independent contractor, you may be liable for unpaid taxes.

According to the IRS:

The IRS has started a new program that will enable many employers to resolve past worker classification issues by voluntarily reclassifying their workers. This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit....

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

The requirements to qualify are set forth as follows:

• Consistently have treated the workers in the past as nonemployees,
• Have filed all required Forms 1099 for the workers for the previous three years
• Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers

If you have any questions regarding this program, please let me know.

Trust Property May Be Held in Tenancy by the Entirety

Effective January 1, 2011, married couples may hold their primary residence as tenants by the entirety within one or more trusts. 765 ILCS 1005/1c states, in part:

Where the homestead is held in the name or names of a trustee or trustees of a revocable inter vivos trust or of revocable inter vivos trusts made by the settlors of such trust or trusts who are husband and wife, and the husband and wife are the primary beneficiaries of one or both of the trusts so created, and the deed or deeds conveying title to the homestead to the trustee or trustees of the trust or trusts specifically state that the interests of the husband and wife to the homestead property are to be held as tenants by the entirety, the estate created shall be deemed to be a tenancy by the entirety.


Tenancy by the entirety affords married couple with extra creditor protection in Illinois. If you have your principal residence in your living trust(s), give me a call to discuss taking advantage of this new law.