Estate and Gift Taxes

Estate planning, when done properly, looks at many different angles above and beyond simply discussing who you wish to leave assets to. For instance, considering the tax consequences of your estate is a responsible thing to do during the estate planning process. Estate taxes can be significant and may take out a sizeable chunk from the net worth of your estate. It can be an unexpected financial hit to those who are expecting to inherit from your estate. Take a look at what estate and gift taxes apply in Minnesota before you begin the estate planning process.

What Estate and Gift Taxes Apply in Minnesota?

Minnesota imposes a state estate tax in addition to the federal estate tax. A resident of Minnesota or a person who owns a substantial amount of property there, may be subjected to an estate tax on assets they wish to distribute upon their death. However, this tax will not be applicable to all Minnesota estates. For 2019, only estates that have a value of $2.7 million or more will be subject to the state estate tax. This number is expected to increase next year. For federal estate tax purposes, only estates valued at $11.4 million or more in 2019 will be subject to the estate tax. Because of the discrepancy in the exemption amount between the federal and Minnesota state estate tax, an estate may not be subject to the federal tax, but still may be liable for paying the state tax. It is also worthy to note that there is a $5 million business and farm exemption for some qualifying small businesses and farms. Those that qualify will be able to claim a $5 million exemption fro the Minnesota estate tax.

Some people attempt to reduce their estate tax liability by decreasing the value of their estate through giving gifts while they are still alive. However, some gifts that are made within three years of death will still be subject to the estate tax. This rule is in place to try and curb the use of lifetime gift giving in an attempt to avoid estate taxes. Still, only gifts taxable under federal law would be subject to the Minnesota estate tax. This means that gifts less than $15,000 per recipient, per year, would follow subject to the Minnesota estate tax.

In Minnesota, the executor of an estate must file a tax return if the value of the estate is in excess of the Minnesota individual estate tax exemption (greater than $2.7 million in 2019). The value of your estate will include:

  • Real estate
  • Bank accounts
  • Investment Accounts
  • Personal property
  • Life insurance policies
  • Retirement accounts
  • Business interests

Property that is left to a surviving spouse will not be subject to the Minnesota estate tax regardless of its value. Additionally, some expenses may be deducted from the gross estate.

Trusted Minnesota Estate Planning Attorney

At Unique Estate Law, we provide comprehensive estate planning services. We are here not just to figure out who will get what from your estate, but also look at things such as the tax consequences of your estate plan. These are big details that are too important to be overlooked. For estate planning you can count on, contact us today.