By Rachel K. Anderle, Associate Attorney, Generation Law

As the new year begins, the latest legislative changes related to estate planning, long-term care, and Medicaid, as well as annual updates to the Federal tax code, begin to take effect. While some changes clarify the law in these areas, others will have a larger impact. Here is an overview of legislation that took effect January 1, 2025:

Estate Planning & Guardianship (Illinois)

This past year, the legislature amended the Illinois Trust Code to require trustees to search for any unclaimed property that may be associated with the trust they are administering. Before destroying any records, the trustee is also required to search for any property that has been reported to a state unclaimed property administrator. This change also requires trustees to keep trust records for a minimum of seven years after the trust is dissolves.

Also taking effect is Senate Bill 3421, which establishes clear guidelines for when it is reasonable for third parties to refuse to honor a Power of Attorney (POA). The bill provides protections against agents acting improperly or fraudulently, while also outlining specific circumstances under which it would be reasonable to refuse to honor a power of attorney, such as when there is evidence of financial abuse or incapacity.

Under the new law, it would be unreasonable for a third party to refuse to honor a POA if the POA is not in the statutory prescribed form, if there has been a lapse of time since its execution or the agent’s acceptance, or if the document lacks original signatures but is accompanied by a certification. However, refusal would be considered reasonable under certain conditions, such as when the agent fails to provide a required affidavit, refuses to provide a certified copy of the POA, or when there is a suspicion of financial abuse, incapacity, or fraud. Additionally, if there are concerns about the principal’s death, incapacity, or a fraudulent POA, refusal may be justified. For example, if there are issues with the signatures, notarization, or other issues with the documentation that could suggest fraud or invalidity. Other reasonable causes for refusal include evidence of criminal history, prior financial mismanagement by the agent, or concerns about neglect or exploitation.

The legislature also passed House Bill 4251, which clarifies the documents that can be executed in accordance with the Electronic Wills and Remote Witnesses Act. While electronic wills became increasingly popular since the Act originally passed during the COVID-19 pandemic, this bill clarifies that the Act does not apply if the document expressly does not allow electronic signatures.

Lastly, the legislature made a small change to the Probate Act of 1975 regarding the procedures and notice requirement for the appointment of a successor guardian. House Bill 4961 requires that notice of the hearing on a petition for a successor guardian is provided at least three days before the hearing for a successor to a temporary guardian and at least 14 days before a hearing for a successor to a limited or plenary guardian. The notice should be sent by mail or delivered in person to the individual with a disability, the proposed successor guardian, and any others listed in the petition. However, the court may waive the notice requirement if good cause is found.

Medicaid & Long-Term Care (Illinois)

Several pieces of legislation passed in 2024 affect long-term care and Medicaid. Senate Bill 2697, for example, requires Medicaid to cover genetic cancer screening for high-risk patients starting in 2026. This will provide more opportunities for early detection of inherited gene mutations linked to cancer, and also provide Medicaid patients with coverage for proactive, evidence-based screenings and treatment.

For those who may be applying for Medicaid later this year, Senate Bill 3430 mandates that the Illinois Department of Healthcare and Family Services develop a comprehensive guide explaining Medicaid’s look-back period, which determines eligibility for long-term care. By July 1, 2025, the Department is to have available on its website a guide that provides:

  • Overview of the Medicaid 5-year look-back period
  • Eligibility criteria affected by the Medicaid 5-year look-back period
  • Calculation of the Medicaid 5-year look-back period
  • Examples and scenarios
  • Transfers or gifts during the Medicaid 5-year look-back period
  • Exceptions and exemptions
  • Documentation requirements
  • Planning for eligibility
  • Appeals and dispute resolution
  • Contact information and resources
  • Frequently asked questions

Once available, this guide will be a valuable resource for individuals and families navigating the complexities of Medicaid eligibility and planning for long-term care needs.

Additionally, the legislature passed a number of bills into law this past year focused on improving protections and care for residents of long-term care facilities. House Bill 4276 introduces new consumer protection measures, while other bills, such as Senate Bill 1779 and House Bill 5643, create a program for certified medication aides and expand coverage for at-home pregnancy tests, respectively.

Taxes (Federal)

Inflation Adjustments

Ahead of the new year, the IRS released its inflation-adjusted numbers for 2025, which will affect all taxpayers.

The standard deduction will increase to $15,000 for unmarried individuals and $30,000 for married couples filing jointly. Additionally, individuals who are blind or aged will benefit from an additional deduction of $1,600, or $2,000 for those who are unmarried and not surviving spouses.

The tax brackets for trusts and estates have also been adjusted for inflation. If taxable income is $3,150 or less, income to the trust or estate will be taxed at 10%, while income over $15,650 will be taxed at 37%.

Additionally, the estate tax exclusion has increased to $13.99 million for those who die in 2025. The annual gift exclusion increased to $19,000, with a special provision for gifts to noncitizen spouses, which remain exempt up to $190,000.

The IRS also increased the gross income limitation for a qualifying relative (a person who can be a dependent under the tax code). While the tax code allows taxpayers to claim certain individuals as dependents on their returns (a “qualifying relative”), these qualifying relatives must earn income below a certain threshold. In 2025, a qualifying relative will need to earn less than $5,200 annually to be claimed as a dependent of another.

Long-term care premiums eligible to be deducted as medical costs are based on the taxpayer’s age but are also adjusted for inflation. Individuals aged 40 or younger can deduct premiums up to $480, while those between 40 and 50 can deduct premiums up to $900. Individuals aged 50 to 60 can deduct premiums up to $1,800 and those between 60 and 70 can deduct up to $4,810. For individuals over 70, they can deduct up to $6,020.

Starting in 2025, workers will be able to contribute up to $23,500 to their 401(k) accounts, an increase from $23,000 in 2024. Those over the age of 50 can still make additional contributions, which will remain at $7,500 in contributions over $23,500. A new provision for workers aged 60 to 63 will allow them to make even larger catch-up contributions of up to $11,250 over $23,500, replacing the previous $7,500 limit for this age group.

Lastly, the tax imposed on the first sale of any arrow shaft is $0.63 per shaft in 2025. We have been amused about this tax for at least the last 20 years and believe everyone should know about it if they are thinking of becoming a bow and arrow hobbyist.

Other Changes

The IRS is continuing to phase out the exclusion for income from savings bonds used for qualifying education expenses. Starting in 2025, this exclusion will no longer be available to joint returns with incomes exceeding $149,250, and will not be available for other returns with income exceeding $99,500.

The Illinois legislature amended state law to allow unused funds in college savings programs to be rolled over into a Roth IRA. While this change has been in effect under federal law since 2022, the Illinois legislature needed to act in order for this change to apply to Illinois’s Bright Start and Bright Directions 529 plans. Now, parents will be able to use those leftover funds to start retirement savings for their child.

On the digital front, cryptocurrency tax reporting will see an overhaul. Starting in 2025, cryptocurrency exchanges will be required to issue a Form 1099-DA reporting sales to customers. Additionally, taxpayers must report their cost basis for crypto sales based on the specific wallet or account where the assets were held. This change eliminates the “universal wallet” approach that was previously allowed.

Starting in 2025, the Illinois Gives Act (Public Act 103-0592) introduces a nonrefundable state income tax credit for 25% of charitable gifts made to qualified community foundations, effective for the next five years. This benefit is particularly advantageous for donors over the age of 70, as they can use their IRAs to make charitable contributions and itemize these gifts on their federal income taxes. As a result, they can reduce both their federal and state income taxes. The credit is capped at $100,000 per individual.

Chicago Tax Changes

The Chicago City Council passed its 2025 Revenue Ordinance to make several changes to Chicago-specific taxes that took effect January 1. The city raised the tax on leases for personal property to 11%. Additionally, the city’s tax on television, streaming, and online games increased to 10.25%. Parking, including valet services, are now taxed at 23.25% and bags issued at check-out incur a tax of $0.10 per bag. Effective January 6th, the city began imposing a surcharge of $1.50 for rides from rideshare services in the Downtown Zone between 6 a.m. and 10 p.m. Lastly, the taxes on software licenses, cloud services, and other digital items increased from 9% to 11%.