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Minnesota Enacts New Estate and Gift Tax Laws

On March 21, 2013, Governor Dayton signed a tax bill that impacts Minnesota residents as well as those who reside out-of-state, but own real estate and other assets in Minnesota.

Estate Tax Exemption:  
The Estate Tax Exemption for Minnesota residents will increase over the next five (5) years, from $1 million for a death in 2013, up to $2 million for Minnesota residents who pass away in 2018 and after.  The chart below shows the scheduled increases in the Minnesota Estate Tax Exemption.

    Year     

   Exemption    

    Estate Tax Rate for
    Amount Over Exemption    

 2013

 $1,000,000

 41% - 10%

 2014

 $1,200,000

 9% - 16%

 2015

 $1,400,000

 10% - 16%

 2016

 $1,600,000

 10% - 16%

 2017

 $1,800,000

 10% - 16%

 2018

 $2,000,000

 10% - 16%


If you are not a Minnesota resident, but own real estate or other assets in Minnesota, the exempt value from Minnesota estate tax will also be increasing.

Repeal of Minnesota Gift Tax:  
In July, 2013, a new Minnesota Gift Tax went into effect.  The Minnesota gift tax has been repealed - retroactively effective as of July, 2013. For Minnesota residents who made gifts after July 1, 2013, a Minnesota Gift Tax Return does not need to be prepared or filed, and no gift tax is due for gifts in Minnesota.  The Federal gift tax law remains unchanged.  If you made a gift in 2013 after July 1 of more than $1 million, no Minnesota gift tax is due on April 15, 2014, to the State of Minnesota.  

Continuation of Other 2013 Minnesota Estate Tax Law Changes:
Changes were made in 2013 to subject non-Minnesota residents to estate tax for partnerships and other entity assets located in Minnesota. Other than slight modifications, those laws remain in place.  

Who do the Tax Law Changes Impact? 
The tax law changes may affect certain clients with existing estate planning documents.  Among others, a married couple with a combined net worth in the $1,000,000 to $4,000,000 range may benefit from updating their estate planning documents in light of the new tax laws. 

If you have any questions on the impact these laws have upon your estate plan, please contact the attorneys in our Tax, Trusts & Estates practice area.
 
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