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Do Minnesota estate taxes apply to your family?

A lot of middle class families do not realize that they could potentially qualify for the estate tax or may not even have it on their radar because they think it is a problem only for the very wealthy. However, when you add up real estate, retirement accounts, life insurance policies, and other assets many families might be surprised to see how fast their holdings add up to reach the $1 million mark.

This happens most often when one spouse has already passed away and has left retirement accounts and life insurance proceeds. If a retirement account that is still invested has $200,000 in it, a life insurance policy is worth $500,000 and the family home is valued at $250,000 with the potential for increase, being a millionaire could sneak up without much notice. Those can pass without being taxed to the surviving spouse but will be taxed when it continues on to children, friends, or a charitable cause.

Estate taxes can be minimized with proper planning, since Minnesota also provides for exemptions of up to $1 million per person. To take advantage of that, couples must make a plan before one of them passes away.

Recently Minnesota legislators made a change to estate tax law, providing for taxes on assets transferred during a person’s final three years of life. This means that estate assets could be considered even more robust, particularly if someone is in the process of selling a business or a home in their later years of retirement.

Source: MPR News, "Estate tax could also bite the middle-class," Martin Moylan, Oct. 8, 2013. 

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