Minnesota Estate Tax Planning: What You Need to Know

While you’re looking at your estate, it’s easy to overlook what you’ll owe the federal and state government. But without proper planning and vigilance, taxes on your estate can drastically reduce what you can pass on. In fact, federal estate taxes can reach up to 40%, making a significant difference to your assets.

A dedicated legal team can help mitigate tax liability with a well-researched and thorough estate tax planning strategy. 

PLEASE NOTE: KTF Law Firm does not provide tax advice. For that, we recommend working with a trustworthy CPA. 

Understanding Minnesota Estate Tax

You’ve worked hard to acquire assets during your life, and now it’s time to think about transferring them to beneficiaries or charities. Before you get too excited about how much you can pass on, remember there are federal and state estate taxes to contend with.

As of 2023, here in Minnesota, you may pass up to $3 million in assets to your chosen beneficiaries without paying estate tax. Anything about that amount is taxed using progressive brackets ranging from 13% to 16%. With a smart estate tax planning strategy, a married couple can pass on $6 million without the interference of estate taxes. 

The exception is spouses and charities. You can pass on an unlimited amount to your spouse or to a charity without being on the hook for estate taxes. 

The right approach, including a long-term gifting plan and irrevocable trusts, can help lighten your tax burden. Our experienced legal team can walk you through your options, making sure you feel comfortable and informed every step of the way. 

What About Federal and Minnesota Gift Taxes?

Minnesota does not have a gift tax, but there is a gift tax at the federal level. As of 2023, you can give away $17,000 annually per donee, also known as an annual exclusion amount. If you exceed the annual exclusion amount, you must file a gift tax return. However, you can gift to as many recipients as you’d like. 

Minnesota Estate Tax vs. Inheritance Tax

It’s worth noting that these are not the same tax. Estate taxes are taken out before the assets are passed on. Inheritance taxes are collected from the beneficiaries upon receiving the money. Currently, there is no inheritance tax in Minnesota. This would only affect assets (i.e., property) in a state with an inheritance tax. 

Is Estate Planning Tax Deductible?

Estate planning fees used to be tax deductible, but with the passage of the Tax Cuts and Jobs Act, they are not. These provisions are set to end at the end of 2025, and it remains to be seen what parts of the bill will remain in place going forward. 

Trust KTF to Help You Get Where You’re Going

This process can be complex, but you don’t have to go through it alone. At KTF Law Firm, we can lay out an effective strategy so you get to pass on your hard-earned money. Get your affairs in order so you feel confident about the future. Schedule a consultation with our team! 

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