Wealth Management in Illinois

Four kinds of Illinois wealth

Illinois is home to about 12.7 million people, and its fortunes are built in distinct ways. According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, the median household earns about $83,390 and about 37.8 percent of adults hold a bachelor’s degree or higher. The households that look for a wealth manager usually fall into one of four groups.

Chicago money: pay that does not arrive evenly

The Chicago exchanges, banks, consulting firms and law firms pay in ways a standard budget does not handle. A trader may earn most of a year’s income in a few months. A partner receives distributions and a share of profits. An executive collects deferred bonuses and stock that vest over several years. A wealth manager smooths these flows by setting a monthly draw, reserving taxes at the time income arrives and planning the sale of stock around the calendar.

The tax work is specific. Illinois taxes income at a flat rate of 4.95 percent, so state tax does not rise with income the way it does in graduated states, and the planning effort goes into federal brackets and timing. Retirement plan contributions, charitable gifts and the use of a donor-advised fund in a high-income year can all lower the federal bill. Our tax planning guide explains the basic moves.

Farmland and the family operation

Illinois ranks among the leading corn and soybean states, and farmland can be worth far more than the farm earns in a year. Families often hold that land across generations, and a well-meaning plan can still go wrong. One child farms while others live in cities, and treating them equally without selling the land requires careful design.

Common tools include a trust, a family limited liability company that holds the land, a lease that pays non-farming heirs, and life insurance that provides cash for the heirs who will not receive land. Illinois law, the federal estate tax and the state estate tax all come into play, so an estate attorney and a tax professional need to work with the wealth manager. Many families also review how their land is valued for tax purposes and whether special rules for farmland assessment apply.

The Illinois estate tax

This is the rule that surprises families most. Illinois has its own estate tax, and the exemption is far lower than the federal one. An estate that owes nothing to the federal government can still owe the state. The tax is calculated with a special formula, and it can be steep for estates just over the threshold. The Illinois Attorney General administers it, and lawmakers have discussed changes, so confirm the current figures before you act.

Several tools can reduce or delay the tax. A married couple can use trust planning so that each spouse uses their own exemption. Lifetime gifts, charitable bequests and life insurance held in a trust outside the taxable estate also help. A wealth manager does not replace the attorney, but works from the same numbers so that the investment plan and the estate plan point the same direction. Our estate planning guide covers the documents behind these steps.

Property tax as a wealth issue

Illinois property tax rates rank near the top nationally, and the bill falls on homes, farmland, rentals and commercial buildings alike. Owners can appeal assessments, claim homestead exemptions on a primary residence and, for older owners, use a senior exemption or an assessment freeze. A wealth plan adds property tax to the carrying cost of every parcel and asks whether the property is worth holding.

It is worth a close look at where real estate is held. A rental in a high-tax county can earn less than the headline rent suggests. A second home in another state may have a lower tax bill, and a move can change the plan.

Retirement plans and pensions

Social Security, qualified pensions and most distributions from 401(k) and IRA accounts are exempt from Illinois income tax, with no age requirement. That makes Illinois friendlier to retirees than its reputation suggests. Public employees, such as teachers and state workers, belong to state pension systems, and the structure of benefits depends on when they were hired, with a later retirement age and smaller increases for those hired after 2010. A wealth manager helps compare payout choices, models survivor benefits and fits the pension into the larger plan. Our retirement planning guide explains the general sequence.

Selling or handing down an Illinois business

Illinois has thousands of family companies in manufacturing, trucking, food processing, construction and professional services, and many owners hold most of their wealth inside them. An owner who wants to retire in five years needs to start now. The first step is an honest valuation, followed by a decision about the buyer: a family member, a key employee through a buyout or employee stock ownership plan, a competitor or a private equity firm. Each route has a different tax result and a different effect on the people who work there.

A wealth manager helps in three ways. It models how much the owner needs from the sale to retire comfortably, so the target price is grounded in a spending plan. It looks at how the proceeds will be taxed and whether a structure such as an installment sale spreads the bill. And it plans where the money goes afterward, since a sudden sale can turn a business owner into an investor overnight. Because Illinois levies a flat income tax and an estate tax, a sale that is timed well and paired with lifetime gifts or a trust can keep more of the value in the family.

Giving with a plan

Illinois families are generous, and giving can lower taxes when it is done thoughtfully. Gifts of stock or other assets that have risen in value avoid the capital gain and can produce a deduction. A donor-advised fund lets a family put a large sum aside in a high-income year and recommend grants over time. A charitable remainder trust can pay income to the family for life and leave the rest to a cause. Gifts to grandchildren and to education accounts, such as Bright Start and Bright Directions, the state’s 529 plans, are another way to move wealth while helping the next generation. A wealth manager coordinates these gifts with your estate plan so each one has a purpose.

What the engagement looks like and what it costs

Expect an intake covering accounts, tax returns, trusts, business documents and insurance, followed by a plan and regular reviews, often quarterly. A good firm brings your CPA and attorney into the discussion.

Fund expenses, trading costs and commissions come on top. Ask for one yearly total.

Want a second opinion on your plan?

An advisor who works with Illinois families can review your investments, taxes and estate documents with you, free and with no pressure.

Request a free review →

Registration and fiduciary duty

The Illinois Secretary of State’s Securities Department registers smaller advisory firms, and the SEC registers larger ones. A registered investment adviser has a fiduciary duty to clients on the advice it gives. Brokers answer to FINRA and mostly live on commissions, and a number of professionals carry both licenses. Search the firm and the person on the SEC adviser database and FINRA BrokerCheck, and read Part 2 of the Form ADV. Our investing basics guide explains how portfolios are built.

Questions to ask before you hire

1. Which person at your firm handles my account from day to day?
2. What is the total I would pay in a year, fund expenses and commissions included?
3. Are you a fiduciary on every piece of advice, and will you sign that?
4. What experience do you have with Corn Belt land, a family company or the Illinois estate tax?
5. Will you meet with my CPA and attorney, or should I carry messages between you?
6. Which custodian keeps my money?

Video meetings let you choose a firm from anywhere in the state, from Chicago to Cairo.

Frequently asked questions