The phone call usually comes a few months after the funeral, not before it. A father has died and left everything to his wife. There was a will, the family was close, and everyone assumed the estate was simple. Nobody thought about taxes because the family isn’t wealthy in any way they’d recognize. They own ground. Some of it has been in the family since before Maple Park had a stoplight. Then the mother dies a few years later, the land has to be valued to settle her estate, and the number that comes back is one nobody in the family had ever seen written down. Only then does someone find out that Illinois has been expecting a check.
I’ve had that conversation with families in western Kane County and across DeKalb County more often than I’d like, and the pattern is nearly always the same. The problem didn’t start when the second spouse died. It started when the first one did, and it was created by a decision that felt like the safest possible choice at the time. This article is about that decision, why land makes it so much more expensive than it would be for other families, and what it looks like to get ahead of it.
Two facts that every land-owning family in Illinois needs to understand
Almost everything that goes wrong in this area comes back to two structural features of Illinois law, and once you understand them, the rest of the article follows naturally.
The first is that Illinois imposes its own estate tax, separate from the federal system, and it starts at a level well below the federal exemption. Most families have heard that the federal estate tax only reaches the very wealthy, and that’s true. What they haven’t heard is that a family can be nowhere near the federal threshold and still owe Illinois. Farmland in Kane and DeKalb County has appreciated to a point where a few hundred acres, or considerably less in the right location, can put an estate over the state line while remaining comfortably under the federal one. I don’t publish the specific thresholds here because they change and I don’t want a family relying on a stale number, but the relationship between the two systems has held for years: the Illinois exclusion sits far below the federal exemption, and the gap between them is where most of the families I work with live.
The second fact is the one that actually creates the problem. Under the federal system, a surviving spouse can generally pick up whatever portion of the deceased spouse’s exemption went unused, which is why leaving everything to a spouse doesn’t cost a family anything federally. Illinois doesn’t work that way. The Illinois exclusion is not portable between spouses. Each spouse has their own, and it’s a use-it-or-lose-it proposition. If the first spouse to die leaves everything outright to the survivor, the marital deduction means no tax is owed at that first death, which sounds like good news. But it also means the first spouse’s Illinois exclusion was never used, and it’s gone. Permanently. When the survivor dies, the whole combined estate is measured against a single exclusion instead of two.
Put those two facts together and you get the most common and most expensive planning mistake in this market. A couple owns land worth more than one Illinois exclusion but less than two. If both exclusions are used, the family may owe nothing. If everything passes outright to the survivor, the family owes tax on the excess when the second spouse dies, and the only thing that changed was the structure of the first spouse’s plan.
Why land makes this worse than any other kind of asset
A family that holds its wealth in brokerage accounts and gets surprised by an Illinois estate tax bill has a problem, but it’s a solvable one. The executor sells some securities, writes the check, and the heirs receive somewhat less than they expected. Nobody’s life changes. A family that holds its wealth in ground faces something different, for three reasons.
Land is illiquid. An estate tax bill is due in cash on a deadline, and farmland doesn’t turn into cash on a deadline. Selling a parcel takes time, the market for it is thinner than the market for a stock, and the timing is dictated by the tax calendar rather than by what’s good for the family. I’ve seen heirs forced to sell the best ground in the operation rather than the parcel they’d have chosen, simply because it was the one a buyer wanted quickly.
Land near growing communities is valued at what a buyer would pay, not at what the ground earns. The default rule for estate tax purposes is fair market value, which means the price a willing buyer would pay a willing seller. For farmland in eastern DeKalb County or the corridor between St. Charles and Elburn, that buyer may not be a farmer. A family that thinks of its ground in terms of yield and cash rent can find that the appraisal thinks of it in terms of subdivision lots. There are special valuation rules that can, in the right circumstances, allow qualifying farmland to be valued on the basis of agricultural use rather than development potential, but those rules come with conditions, ongoing requirements, and potential recapture if the family doesn’t keep farming. They’re a tool, not a safety net, and whether they apply has to be evaluated deliberately rather than assumed.
The heirs who want to keep the ground are the ones who get hurt. This is the part I find hardest to watch. The child who stayed, who farms the ground and intends to keep farming it, is the one who ends up selling part of it to pay a bill that was created by planning that was never done. Their siblings who moved away and just want a check are, in a strange way, better off. The family that most wanted to preserve the land is the family the tax falls hardest on, and the reason is almost always the same. Everything went to the surviving spouse outright, the first exclusion was wasted, and the second estate was too big for the one that remained.
What preserving both exclusions actually looks like
I want to be careful here, because this is where articles like this one usually turn into trust seminars and lose the reader. The concept is simpler than the mechanics. The goal is to make sure that when the first spouse dies, that spouse’s Illinois exclusion gets used rather than skipped, while the surviving spouse remains fully provided for.
In practice, that means the first spouse’s estate plan directs an amount up to their exclusion into a trust for the survivor’s benefit rather than to the survivor outright. The surviving spouse can receive the income from that trust, can use the property it holds, and in many designs can have access to principal for their needs. What they don’t do is own it. Because they don’t own it, it isn’t counted in their estate when they die, which means the family effectively gets to shelter two exclusions worth of land instead of one. The rest of the first spouse’s estate, above that amount, can pass to the survivor in a way that still qualifies for the marital deduction, so nothing is taxed at the first death.
For most of the couples I work with, this is built into a revocable living trust that both spouses sign while they’re alive. The trust does nothing unusual during their lifetimes. It only splits into the structure described above when the first spouse dies, and the survivor’s day-to-day life doesn’t change. The land stays in the family, the survivor keeps living on it or renting it out, and the exclusion is preserved in the background. The alternative, which I see far too often, is a simple will that leaves everything to the spouse and a family that discovers a decade later what that decision cost.
A trust-based plan has a second benefit for land-owning families that has nothing to do with taxes. Land that passes under a will has to go through probate in Illinois, and for a family with multiple parcels, some in Kane County and some in DeKalb, that process is slow, public, and expensive at a moment when the family least needs any of those things. Land held in a trust passes without a court proceeding, which matters when the operation needs to keep running through planting season regardless of whose name is on the deed.
The conversation that has to happen before anything gets drafted
Here’s something I tell every land-owning family before we talk about documents. The estate tax problem is real, but it’s not the hardest problem you have. The hardest problem is that you’ve probably never sat down together and answered the question of who actually wants to farm this ground.
It sounds obvious. It almost never is. I’ve sat with families where the parents assumed the oldest son would take over and the oldest son had assumed for twenty years that he’d be selling his share as soon as he legally could. I’ve sat with families where two siblings both wanted the operation and had never said so out loud to each other, and where a third sibling who’d been quietly doing most of the work had never been asked. When those conversations happen after a death, in the middle of a tax deadline, with an appraisal on the table, they go badly. When they happen before the plan is drafted, they shape the plan into something that actually works.
The answers change the structure. A family where one child will farm and two won’t needs a plan that gives the farming child control of the operation without forcing them to buy out their siblings at development value. That might mean the land goes to one child and other assets go to the others, or it might mean a long-term lease arrangement, an entity that holds the ground with rules about who can sell and when, or a life insurance policy that equalizes the inheritance without touching the ground. A family where nobody wants to farm needs something entirely different. None of that can be designed well until the family has been honest with itself, and I’d rather spend the first meeting on that than on trust provisions.
This is also where estate planning and asset protection planning start to overlap. How the land is held during your lifetime affects both what happens when you die and what happens if someone gets hurt on the property, if a child goes through a divorce, or if a lawsuit lands on the operation. Families who own ground in Kane and DeKalb County are usually best served by looking at both questions at once rather than fixing one and discovering the other later.
Where to start
If you own land in this part of Illinois and you’ve never had a conversation about the state estate tax, the honest first step is to find out whether you have a problem at all. That means a realistic look at what the ground would appraise for today, not what it earns and not what you paid for it, and a look at how it’s titled and what your current documents say happens when the first of you dies. For many families, that review is the moment they realize a simple will isn’t going to do what they need it to do.
I’ve written about what to look for in an estate planning attorney in Kane County, and for families with acreage I’d add one thing: find someone who’ll ask about the land before they ask about the documents. You can read more about how I approach estate planning for families in this area, or schedule a confidential strategy session and we’ll start with the ground.
Frequently asked questions
Does Illinois have its own estate tax?
Yes. Illinois is one of a minority of states that imposes an estate tax separate from the federal system, and the level at which it begins is well below the federal exemption. That means an estate can owe nothing to the federal government and still owe Illinois. The specific threshold is set by statute and can change, so confirm the current figure with an attorney when you plan rather than relying on a number from an article.
Is the Illinois exclusion transferable between spouses?
No. Unlike the federal exemption, which a surviving spouse can generally pick up if it went unused, the Illinois exclusion belongs to each spouse individually and is lost if it isn’t used at that spouse’s death. Leaving everything outright to a surviving spouse uses the marital deduction, which avoids tax at the first death, but it also means the first spouse’s Illinois exclusion is wasted. Preserving both exclusions requires a plan that directs some assets into a trust for the survivor rather than to the survivor outright.
Will my family have to sell the farm to pay estate tax?
It depends on whether the estate is exposed, how much of it is land, and whether there’s any planning in place. Families that get into trouble are usually the ones where both exclusions weren’t preserved and where nearly all the value sits in ground rather than in anything liquid. With a plan that uses both spouses’ exclusions and, where appropriate, sets aside liquidity through life insurance or other assets to cover any remaining bill, most families in Kane and DeKalb County can keep the land intact. Without one, a partial sale is a common outcome.
How is farmland valued for estate tax purposes?
The default is fair market value, meaning what a willing buyer would pay a willing seller. For ground near expanding communities, that can reflect development potential rather than agricultural use, which is often far higher than a family expects. There are special valuation rules that can allow qualifying farmland to be valued based on its use as a farm, but they come with eligibility requirements, ongoing conditions, and the possibility of recapture if the family stops farming within a set period. Whether they apply is a planning question, not an assumption.
What should I do first if I own land in Kane or DeKalb County?
Get a realistic current value for the land, pull out whatever estate documents you have, and find out what actually happens under those documents when the first spouse dies. If the answer is that everything goes to the survivor outright, you’re likely wasting an exclusion and should have that reviewed. Then have the family conversation about who wants to farm before you sit down to draft anything. I cover what a complete plan involves on my estate planning page, and a strategy session is the fastest way to find out where you stand.
Supernus Law serves land-owning families throughout Kane County, DeKalb County, and the surrounding farm communities, including Maple Park, Sycamore, Elburn, DeKalb, Hinckley, Kaneville, and Sugar Grove. If you own ground and you’re not sure whether Illinois is expecting a check from your family someday, schedule a confidential strategy session and we’ll find out before it matters.
