Each week this blog will be a platform for discussing estate planning issues that are relevant to Minnesotans. With the economy finally showing improvement and governments taking steps to raise revenue, Twin Cities residents would do well to update their estate planning documents to ensure that their legacies are protected for younger generations.
A few major legal changes took effect earlier this week, and high earners and business owners, in particular, should be aware of the implications. The changes relate to the estate and gift taxes.
Some states recently did away with certain taxes on wealth transfers, but not Minnesota. Our state and Connecticut are the only two in the nation that have opted to collect a tax on large gifts to family members.
The tax will not affect most Minnesotans, but the new measure does close a loophole that allowed wealthier residents to avoid the estate tax by gifting large assets. There are, however, ways of minimizing estate and gift tax liabilities, and Minnesotans may want to meet with their estate planning attorneys to create a strategy.
It should be noted that Minnesota's gift tax will be in addition to the federal gift tax. In each case, a 10-percent tax will be applied to gifts valued at more than $14,000 and given to the same recipient in the same year.
Also important to realize is that the gift tax may now affect businesses that owners want to pass down to family members. The gift tax will apply if the business is worth more than $1 million, so business owners throughout the state will want to revisit their estate plans to figure out the best way of protecting assets.
Source: twincities.com, "Minnesota gift tax kicks in Monday," Nick Woltmann, June 28, 2013