Married couples in Illinois face a hidden estate tax trap that could cost their heirs hundreds of thousands of dollars, according to Kravets Law Group, a Chicago-based firm serving clients across Illinois, Pennsylvania, and New Jersey. The firm is drawing attention to a critical difference between federal and state estate tax laws: Illinois does not allow portability of the estate tax exemption between spouses, a rule that can dramatically increase tax liability for unsuspecting families.
At the federal level, portability allows a surviving spouse to inherit any unused portion of their deceased spouse's estate tax exemption. For 2026, the combined federal exemption for a couple is $30 million, meaning that with a timely filed estate tax return, the full amount can be shielded even if all assets pass outright to the survivor. This is widely considered a cornerstone of modern estate planning. However, Illinois offers no such portability. The state's estate tax exemption is set at $4 million per person, and that exemption is lost at the first spouse's death unless specific steps are taken during life to preserve it.
If a married couple's entire estate passes directly to the surviving spouse, the first spouse's $4 million exemption is wasted. The survivor is then left with only their own $4 million exemption to shield what is now a combined estate. Worse, Illinois applies its estate tax as a "cliff," meaning that once an estate exceeds $4 million, the tax is calculated on the entire estate rather than just the amount above the exemption. An Illinois couple with $8 million in combined assets who rely on outright transfers between spouses could face a state estate tax bill of several hundred thousand dollars at the second death—an outcome that proper planning can avoid entirely.
The standard solution is a properly structured credit shelter trust, often called an AB trust or bypass trust. When the first spouse passes away, a portion of their assets—up to the $4 million Illinois exemption—funds a trust for the benefit of the surviving spouse. The survivor can use the trust assets during their lifetime, but those assets are not considered part of their own taxable estate when they later pass. The result is that both spouses' $4 million exemptions are preserved, shielding $8 million from Illinois estate tax rather than $4 million.
Credit shelter trusts offer benefits beyond tax savings. They can protect assets from future creditors, preserve wealth for children from a prior marriage, and prevent assets from being redirected if the surviving spouse remarries. For families with children from multiple marriages, blended family dynamics, or concerns about a surviving spouse's long-term decision-making, these non-tax protections are often as important as the tax planning itself.
"There's a clear and well-established way to plan around this gap in state and federal law," said founding attorney Daniel Kravets. "The catch is that the planning has to happen while both spouses are alive and able to sign documents. Once the first spouse passes away, the available planning options start to narrow."
Kravets Law Group, founded by attorney Daniel Kravets, who was raised outside Philadelphia by a Russian immigrant family, built its practice around the belief that legal representation should feel like a partnership, not a transaction. The firm offers complimentary consultations for married couples who want to review their current estate plans and understand whether they are positioned to preserve both spouses' Illinois exemptions. For Illinois residents, the implications are clear: without proactive planning, a significant portion of an estate may be unnecessarily lost to state taxes. As the federal exemption remains high, the Illinois gap becomes an increasingly costly oversight. Couples are urged to act while both spouses are alive, as the options for preserving the first spouse's exemption diminish after death.
