Estate Trusts

Educational primer hub

HB2368 (proposed reform)

Date: 2026-05-18
Educational only — not legal or tax advice. Confirm status and text on ILGA before planning.

Legislative status

Item Status
Bill HB2368 (104th GA), introduced 2/4/2025 (Rep. Croke et al.)
Enacted? No — not passed into law
Last action (ILGA, verified 2026-05-18) 3/21/2025 — House Rule 19(a), re-referred to Rules (after Revenue & Finance / Tax Credit subcommittee)
Later activity 5/20/2025 — motion to suspend Rule 21 prevailed; bill did not advance to floor vote or governor

Current law remains 35 ILCS 405 as compiled: Illinois estate tax = state death tax credit under IRC §2011 as in effect 12/31/2001, with Illinois $4,000,000 exclusion (not federal portability). ilcs-405-estate-tax-act

Is this “Illinois raising the estate tax”?

Partly yes, but that oversimplifies it.

  • The bill is primarily a method change: replace the legacy pick-up credit formula with Illinois taxable estate × stated rate for deaths on or after 1/1/2026.
  • It does not increase the $4M exemption (sponsor described the bill as a reform starting point, not an exemption hike).
  • Analysts note it could raise revenue on larger estates (explicit rates up to 22% on the full Illinois taxable estate) while lowering tax for some smaller taxable estates vs. the old credit table. il-hb2368-estate-tax-reform-2026
  • It also widens the base (e.g. certain gifts within 3 years of death added into the Illinois taxable estate).

So: revenue-raising intent is plausible, especially for estates with a large Illinois taxable estate, but it is not a simple “raise the exemption threshold” bill—it keeps $4M and changes how tax is computed.

Current law vs. HB2368 (2026+ deaths, if enacted)

Current law HB2368 (proposed)
Trigger Person dying before 1/1/2026 (credit rules continue) Person dying on or after 1/1/2026
Tax formula State tax credit (IRC §2011, 12/31/2001 version) × IL situs % Illinois taxable estate × Illinois rate × IL situs % (same apportionment idea)
Exemption $4,000,000 in credit computation $4,000,000 “exemption amount” deducted in Illinois taxable estate
Rate structure Implicit in federal 2001 credit table (~0.8%–16% effective on taxable amounts per practitioner summaries) Single flat rate on entire Illinois taxable estate by bracket: 5% / 10% / 16% / 22%
Illinois QTIP 35 ILCS 405/2(b-1) — state-only QTIP election Retained
GST State credit approach Same rate schedule on amount over $4M for 2026+ GST transfers

Illinois taxable estate (proposed)

Federal gross estate (IRC §2031), whether or not a federal return is required, plus:

  • Property in Illinois QTIP if elected for IL but not federal
  • Taxable gifts within 3 years of death (with situs rules)

Minus:

  • $4,000,000 exemption amount
  • Deductions under IRC §§2053, 2054, 2055, 2056, 2056A
  • Illinois QTIP marital deduction if elected under (b-1)

Tax = Illinois taxable estate × one rate (not a marginal staircase—the whole base uses the rate for its bracket):

Illinois taxable estate Rate (on full base)
≤ $6M 5%
> $6M – $16M 10%
> $16M – $21M 16%
> $21M 22%

Cliff risk: $1 over a breakpoint (e.g. $6,000,001) moves the entire estate from 5% to 10% on the Illinois taxable estate.

Zero tax if Illinois taxable estate ≤ 0.

Exemption / filing

  • Exemption amount stays $4,000,000 — not indexed in bill text.
  • Gross estate > $4M would still typically require Form 700 attention; owing tax depends on deductions, marital planning, and (under HB2368) the new base and rates.
  • No Illinois portability — unchanged by this bill; each spouse still needs separate planning to use both $4M amounts. isba-married-tax-planning

Who likely pays more vs. less (if enacted)

Rough guide only—run IL AG / professional worksheets for actual numbers.

Estate profile Likely direction
Gross ≤ ~$4M (after deductions) Often no Illinois tax (same threshold concept)
Moderate taxable estates above $4M gross but small Illinois taxable estate Possible decrease vs. credit formula (commentary)
Illinois taxable estate in mid/high bands, especially > $6M / $16M / $21M Likely increase — higher stated rates and cliffs
Decedents with recent large gifts Likely increase — gifts pulled into base
Non-IL situs property Still apportioned; IL share of tax reduced by situs % (same policy as today)

Married couples — practical takeaway

HB2368 does not fix the federal/Illinois gap or add portability.

  • Still use bypass / credit shelter (B) trust + marital A / QTIP patterns to preserve two $4M Illinois exemptions. isba-married-tax-planning
  • Illinois-only QTIP remains available and is integrated into the proposed Illinois taxable estate definition.
  • If the bill ever passes, revisit formulas near $6M / $16M / $21M Illinois taxable estate (second death, large QTIP inclusion, or low deductions)—cliff effects matter more than under the credit table.

Sources