The Illinois estate tax exemption is $4,000,00035 ILCS 405/2Verified Sep 15, 2026View source; an estate below it owes no state estate tax. The exemption is a fixed amount set by statute35 ILCS 405/2Verified Sep 15, 2026View source. A taxable estate faces graduated rates up to 16%35 ILCS 405/2Verified Sep 15, 2026View source.

No. The IRS does not treat inherited money, real estate or personal items as income, so a beneficiary in Illinois does not report them on a federal return when received. Two exceptions: an inherited retirement account (a 401(k) or a traditional IRA) is taxed as ordinary income as it is withdrawn, and earnings after the date of death are taxable. Inherited property takes a stepped-up basis, its value on the date of death, for any later capital gain.

When someone dies, the cost basis of the property they leave is reset to its fair market value on the date of death26 USC § 1014Verified Sep 15, 2026View source under IRC § 1014. A later sale is taxed on the gain above that stepped-up basis, not above what the original owner paid, so the appreciation of the owner's lifetime is never taxed. The rule is federal and applies in Illinois as in every state.

Illinois intestacy law decides. Illinois follows separate property rules755 ILCS 5/2-1Verified Sep 10, 2026View source: the surviving spouse's share depends on whether children survive and whose children they are. The estate passes to the closest surviving relatives, in most cases the spouse and children first, then in order: Parents and siblings; Grandparents and their descendants; Great-grandparents and their descendants; Nearest kindred; The county, and the State of Illinois755 ILCS 5/2-1Verified Sep 10, 2026View source.