You are currently browsing the archives for the Estate Planning category.





Archive for the ‘Estate Planning’ Category

Will Minnesota Tax Your Estate?

Tuesday, July 10, 2012 @ 08:07 AM
Author: Steven Ness

The State of Minnesota imposes a tax on the estates of individuals who are residents of the state when they die or who own tangible property in MN when they die. The taxable estate is generally the fair market value of the estate on the day the decedent died, less deductions (e.g., transfers to a surviving spouse and charitable bequests) and an exemption mount, which is $1 million for unmarried individuals. The tax is imposed under a graduated rate schedule on the taxable estate.  The tax rates range from 0.8% to 16%. For the 16 years ending December 31, 2001, the MN estate tax was directly linked to the federal tax as a “pickup” or “soak-up” tax equal to the credit allowed under federal estate tax for state death taxes. As a pickup tax, the MN tax imposed no additional tax burden on estates. For each dollar of state tax paid, federal tax was reduced by an equal amount.

However, U.S. Congress repealed this credit in 2001, the MN legislature chose to continue imposing the estate tax under the rules in effect before Congress repealed the credit. As a result, the MN estate tax now is a stand-alone tax.  Many people, including some estate planning practitioners, drafted their estate plan around the federal estate tax and ignored the impact of Minnesota’s estate tax rules.  All estate plans, especially estate plans created prior to 2002, should be reviewed, and may need to be modified to recognize Minnesota’s lower taxable estate threshold.

off