Why Illinois Families Still Need an Estate Plan Under the $15 Million Rule

Imagine it’s November 2024, and the Hendersons are sitting in a downtown Chicago conference room signing the final pages of a Spousal Lifetime Access Trust. They’ve just moved $11 million out of their estate, assets they didn’t really want to give up control of yet, into a structure they didn’t fully understand, with $40,000 in legal fees on the invoice. They did it because they’d been hearing the same message for two years, which was that the estate tax exemption was getting cut in half on January 1, 2026 and they had to act now. 

Eight months later, on July 4, 2025, the President signed a law that erased their deadline permanently. 

The Hendersons’ plan wasn’t wrong. It just wasn’t built for the world that actually arrived, and that’s the trap many high net worth families are sitting in right now. The planning conversation still hasn’t fully caught up to the new reality, and the result is that families fall into one of two camps. Some acted aggressively under the old rules and now own irrevocable structures that no longer fit their lives. Others heard “no sunset” and quietly decided estate planning was somebody else’s problem. Both can be costly mistakes, especially in Illinois. 

What actually changed on July 4, 2025 

The One Big Beautiful Bill Act made the federal estate and gift tax exemption permanent at $15 million per person, or $30 million for a married couple, beginning January 1, 2026. The exemption is indexed for inflation starting in 2027, there’s no sunset provision, and the reversion to roughly $7 million that drove three years of planning urgency simply didn’t happen. 

For families with significant wealth, this changes the calculus on a number of things. Gifting strategies that made sense when the clock was ticking now warrant a second look, trust structures built around a deadline that no longer exists may need to be re-examined, and families who never engaged in the conversation should understand that the new rules didn’t eliminate estate planning so much as rewrite the question. 

Two traps Gatewood is seeing 

The first trap is the families who acted aggressively in 2023 and 2024 by funding Spousal Lifetime Access Trusts, making large gifts to grantor trusts, executing sales to intentionally defective grantor trusts, or completing family limited partnership transfers. These were defensible decisions under the old law, but under the new law some of these families are over-structured. They gave up access and flexibility to solve a problem that no longer exists at the size they thought it did. 

The fix isn’t to unwind, because these structures are typically irrevocable, but rather to re-architect the remaining plan around them so the family isn’t living a more restricted life than the current math actually requires. 

The second trap is the families who heard the news and exhaled. A married couple with $12 million in assets reads “$30 million exemption” and concludes they’re safe, and federally they are. But federal is one layer of the cake and Illinois is another, and beneficiary designations, step-up basis, liquidity at death, and generation-skipping strategy are still very much in play. 

Doing nothing is itself a decision, and it’s rarely the right one. 

The Illinois problem worth understanding 

Here’s what gets lost in many national headlines about OBBBA. Illinois has its own estate tax, which kicks in at $4 million per person, and Illinois doesn’t allow portability between spouses. 

Read that again. A married couple living in Wilmette or Hinsdale or Lake Forest can owe zero federal estate tax and still owe the State of Illinois a meaningful check, because without proper planning the surviving spouse can’t use the deceased spouse’s unused $4 million exemption. It evaporates. 

Consider a couple with $8 million in assets. Federally, they’re nowhere near the $30 million threshold and they feel safe. The first spouse dies, and without a credit shelter trust or similar structure properly funded at the first death, that first $4 million Illinois exemption is gone. When the second spouse dies with the full $8 million still in the estate, the Illinois tax is calculated on the amount above $4 million, and the family writes a check that proper planning could have reduced or eliminated. 

This is the conversation that isn’t getting enough attention right now. The national story is the federal sunset that didn’t happen, but the local story is that for Illinois families, state-level planning just became the dominant variable. 

It’s worth saying that the $4 million figure isn’t guaranteed to stay where it is. Several bills are moving through the Illinois General Assembly that would raise the state exemption, with proposals ranging from roughly $5 million to $8 million, including one that would index the figure to inflation going forward. As of now, none of them has passed, so $4 million remains the number that matters for planning today. We’re watching the legislature closely, and if the rules change we’ll bring that to the families we work with rather than leaving them to catch it in the news. Either way, the right posture is the same, which is to plan around the law as it stands now while building in enough flexibility that the next change doesn’t force a rebuild. 

Three families, three outcomes 

The $4 million Chicago family assumes they have nothing to plan for, and federally that’s true. In Illinois, however, the portion of their estate above $4 million is exposed to state estate tax, and without portability planning the family may lose the first spouse’s exemption entirely. The actions worth considering include state-level trust planning, a beneficiary designation review, and a clear-eyed look at how the estate provides liquidity to pay a state tax bill at the wrong time. 

The $12 million family who locked up $6 million in 2024 moved assets into a SLAT believing they needed to use the exemption before it was halved. Under the new law they didn’t need that structure to avoid federal estate tax, but the trust is irrevocable. The decision now is how to optimize around it, which means grantor trust status, distribution strategy, basis planning, and coordination of the SLAT assets with the remaining estate become the new focus. Done well, the trust can still create generational value. Done poorly, the family lives smaller than they need to for the next twenty years. 

The $40 million family who still has federal exposure is above the line even at the $30 million combined exemption, so gifting strategies still win and the math just changed. The question is no longer how to use the exemption before it disappears. The question is how to move appreciation out of the estate efficiently over a multi-decade horizon, with structures that can survive the next legislative change too. Patience replaces panic. 

Questions worth asking yourself right now 

The first question is whether your estate plan was drafted before July 2025, and if so, whether it was built around the assumption that the federal exemption would drop in 2026. 

The second is whether, if you’re married and live in Illinois, your plan captures both spouses’ $4 million state exemptions or quietly loses exemption at the first death. 

The third is what your remaining lifetime exemption capacity looks like under the new $15 million baseline if you made gifts under the old rules in 2023 or 2024. 

The fourth is where the liquidity (cash) comes from when the estate tax bill comes due, and whether the family is forced to sell illiquid assets, business interests, or equities at the wrong moment to write the check. 

The fifth is whether your beneficiary designations on retirement accounts, life insurance, and transfer-on-death accounts are consistent with what your will and trust say, because beneficiary designations override almost everything else. 

If those answers don’t come quickly, the law didn’t change in your favor so much as expose gaps that were already there. 

The Gatewood approach 

The principle that runs through Gatewood planning is the same principle that runs through how we manage portfolios, which is that the job is to build a structure that doesn’t force the family to make bad decisions at bad moments. We don’t want clients selling equities into a downturn to fund retirement income, we don’t want them liquidating a business at a discount to pay an estate tax bill, and we don’t want them making irrevocable decisions based on a tax law that might change again in three years. 

This is the heart of Firm-to-Family®, one of the Key Gatewood Philosophies. Estate planning isn’t a transaction completed at a signing table but a multi-generational relationship between a firm and a family, where the plan is built to evolve with the law, the family, and the assets it serves. The federal exemption changed and the Illinois exemption didn’t, and the family itself will change over time, so the relationship has to hold all of that. 

The estate planning equivalent of that discipline looks like this. We build the plan for the law as it stands today, we build it with enough flexibility that the next legislative swing doesn’t require a rebuild, and we coordinate the federal exemption, the Illinois exemption, the liquidity sources, the beneficiary designations, and the income tax basis story as one integrated picture rather than as five separate conversations with five separate advisors. 

That last part is where many plans break, because estate attorneys handle the documents, CPAs handle the tax return, investment advisors handle the portfolio, and insurance professionals handle the policies, and the family is left to assume that all of those people are talking to each other when they often aren’t. 

What to do this quarter 

If your estate plan was drafted before July 2025, it’s worth a review rather than a rewrite, with a clear-eyed answer to the question of whether the original logic still applies. If you made significant gifts in 2023 or 2024 in anticipation of the sunset, you should know where you stand on remaining exemption and whether the assets you transferred are doing what you actually wanted them to do. 

If you live in Illinois, the state estate tax conversation is now arguably more important than the federal one for many families between $4 million and $20 million, and the plan should reflect that. And if your most recent estate planning conversation ended with “we’ll revisit it next year,” next year is now. 

The law changed. Many plans didn’t. That’s the gap worth closing. 

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Important Disclosures: 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Gatewood Wealth Solutions and LPL Financial do not provide legal or tax advice or services. 

All investing involves risk including loss of principal. No strategy assures success or protects against loss.   

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.