Letter to the Editor: Death, taxes and staying with Illinois

I have seen recent comments and positions taken concerning Illinois estate taxes and how they might benefit Illinois if they were abolished.  Some positions are about the tax being unfair and/or a reason for people to leave our state. While the federal government spends money by collecting revenue through fees, fines, taxes and just printing more money without revenue, Illinois or any state can’t just print more money.

It is good to remember the Jim Edgar 25-year exponential ramp legislation of the late 90s sponsored by a Republican governor and passed by a Democratic General Assembly to deliberately underfund state obligations in the early years with the vision that the people would in future years be buying more stuff to fuel the continued obligations of revenue as this 25-year plan matured.  

Well, that did not work so well.

It’s interesting to read about estate taxes in the past. Our federal government used them to pay for the Civil War on the Union’s side and even the Spanish American War, then saw them repealed after those wars.  A guy by the name of Andrew Carnegie thought they were a good idea. He did not want his kin folks to be too rich and become complacent, so he philanthropized his way into history through places like Carnegie Hall and many institutions of learning. Winston Churchill had similar views about those blessed with a good amount of wealth.

We should keep the basic estate tax structure but move in the direction of how the federal government requires beneficiaries of estates of seniors — me included — who fall will below the $4 million level, which plan to have inherited traditional IRA savings.  Beneficiaries of these funds make required minimum distributions for up to a 10-year period on the amounts allocated in estates. The definition of seniors for these RMAs has been a moving target from 70½ to 73 years in the last 4 years.  Some of the money in these more than $4 million estates are already in such traditional & ROTH IRA funds, but much of it is in real estate or other assets.

The estate, having the obligation to pay these amounts, would transfer these proportional obligations to one or more beneficiaries but not paying these tax obligations immediately.  We would see them placed into a government certified Roth-IRA custodian accounts of their choosing subject to their own investment preferences and pay out every year just 10% of their original estate tax obligation until this obligation was fully met in the 10^th year. 

Any investment gains or losses would be theirs, and the yearly estate tax payout would remain the same.  This payout would continue if a given beneficiary was deceased with any investment gains would go to descendants at the end of the 10-year period and close out of the Roth-IRA subject to federal tax on earnings.

Some people may call this an inheritance tax replacing an estate tax. I see it remaining an estate tax as the amount at issue is still a function of the total estate amount at death and not what may be two or more inheritance allocations.  Any beneficiary could opt out and stay with current plan if they desired.

The state also should use the same federal process of qualified charitable distributions whereby the beneficiaries could allocate some of the tax funds to Illinois-based nonprofit 501(c)3 organizations of their choosing thru the 10-year period or even all in the first year. The IRS yearly limit is $100,000, but for this plan, it should be limited to say 25 percent of the total estate. You decide where some of it goes if you don’t want all of it to go to the government.  Help build that new church or another Carnegie Hall for Quincy for the benefit of all the people of Illinois.

I would appreciate any civil feedback on this.  I am a retired electrical engineer/service manager and not a tax expert, politician, or a person with a $4 million estate — but please don’t tell me to stay in my lane on this.  If we need to change the state tax codes to make this happen, let’s do it. The IRA fiduciary custodians, for their share of potential investment gains, would be happy to have the business. This would be little administrative burden for the state.

Don Carpenter
Quincy, Illinois