If you own a business in Illinois, your estate plan and your business succession plan are connected in ways that most people don’t think about until it’s too late. And 2026 has brought a combination of federal and state changes that make it worth sitting down with an attorney sooner rather than later. Consulting with a Chicago, IL estate planning lawyer can help you align your personal and business goals and protect what you’ve built for the future.
Here’s the bottom line: the federal estate tax exemption just got a lot more generous. But Illinois still taxes estates above $4 million. If your business, home, retirement accounts, and life insurance push you past that threshold — and for many Illinois business owners they do — you need a plan that accounts for both.
The Federal Estate Tax Exemption Is Now $15 Million
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently set the federal estate and gift tax exemption at a baseline of $15 million per person, indexed for inflation going forward. This replaced the temporary doubling under the Tax Cuts and Jobs Act that was set to expire and revert to roughly $7 million.
For married couples, that means potentially $30 million in combined exemption at the federal level. For most small business owners, this means federal estate tax is no longer the primary concern. The planning conversation has shifted.
But here’s what doesn’t change: the $15 million federal exemption does nothing to shield you from Illinois estate tax. And that’s where a lot of families get caught off guard.
Illinois Still Taxes Estates Over $4 Million
Illinois is one of a handful of states that imposes its own estate tax, and the exemption threshold is much lower than the federal level. If your estate exceeds $4 million — and remember, that includes everything: your business interest, your house, bank accounts, retirement accounts, and life insurance proceeds — Illinois taxes the entire estate at graduated rates from 0.8% up to 16%.
For a business owner with a company worth $2 million, a home worth $800,000, retirement accounts totaling $1 million, and a $500,000 life insurance policy, you’re already past the Illinois threshold. That’s not an unusual profile for a successful small business owner in the Chicago area.
During the 2025–2026 legislative session, Illinois lawmakers introduced several bills to modernize the state’s estate tax, including proposals to raise the exemption and adjust how the tax is calculated. None of those proposals have been enacted yet, but the legislative interest signals that changes could be coming. Planning now gives you flexibility regardless of what lawmakers do.
The Small Estate Affidavit Limit Jumped to $150,000
This is a quieter change, but it’s a meaningful one for families and for business succession planning. Effective August 15, 2025, Illinois raised the threshold for using a Small Estate Affidavit from $100,000 to $150,000. Even better: vehicles are now excluded from the calculation entirely.
What does that mean in plain English? If someone passes away and their personal property — bank accounts, investment accounts, personal items — totals $150,000 or less, their family can transfer those assets using a simple affidavit instead of opening a formal probate case. Cars and trucks don’t count toward that limit anymore, regardless of their value.
Under the old rules, a family with $95,000 in accounts and a $25,000 car had $120,000 in countable assets and was forced into probate. Under the new rules, the car is excluded and only the $95,000 counts. That family now avoids probate entirely.
This doesn’t replace the need for a proper estate plan. The Small Estate Affidavit only covers personal property — not real estate. And it only works when there are no disputes. But for modest estates, this change saves families thousands of dollars in legal fees and months of waiting.
Why This Matters If You Own a Business
Business owners face a unique challenge. Your company is probably your most valuable asset, but it’s also the hardest one to plan around. The value can change quickly. It may not be liquid. And without a proper succession plan, your family could be forced to sell the business just to cover the Illinois estate tax bill.
A few things every Illinois business owner should be thinking about right now. First, get a current valuation of your business. You can’t plan around a number you don’t know. Second, review your buy-sell agreement — if you have one. If you don’t, you need one. Third, look at whether a trust structure makes sense for reducing your Illinois estate tax exposure. Irrevocable life insurance trusts, for example, can keep life insurance proceeds out of your taxable estate. Fourth, coordinate your beneficiary designations. Retirement accounts, life insurance, and payable-on-death accounts pass outside your will. If those designations are outdated, your estate plan has a hole in it.
When Was the Last Time You Reviewed Your Estate Plan?
If the answer is more than three years ago — or if you created your plan before 2025 — it’s time. The federal exemption change alone is reason enough to revisit your strategy. Combined with the Illinois estate tax threshold and the updated probate rules, there’s a lot to reconsider.
At our firm, we work with business owners throughout Illinois on estate planning, business succession, and asset protection. We’ll help you understand where your exposure is and build a plan that actually works — not just a binder that sits in a drawer.
Contact Kravets Law Group to set up a review.
For additional background on federal estate and gift tax rules, visit the IRS Estate & Gift Tax page at www.irs.gov/businesses/small-businesses-self-employed/estate-tax.