Minnesota Governor Mark Dayton submitted a proposal to state lawmakers last week asking for various tax reforms, including a change to the state gift and estate taxes and exemptions. At the present time the estate tax exemption is $1 million, so many families meet the threshold and must pay an estate tax. Dayton proposed raising the exemption to $2 million for the estate tax and imposing a 10 percent tax on the value of an estate that exceeds that amount.
The issue has been a controversial one for this governor who himself benefits from inherited money that far exceeds the estate tax exemption he is now proposing. The change in estate tax would reduce the amount of revenue the state brings in by a substantial margin, about $43 million. In addition, Dayton has proposed eliminating the gift tax altogether, saying that it is not fair and that Minnesota is behind the times in being one of the last states to impose such a tax.
Estate taxes are a big issue for many Minnesota families who are putting together a comprehensive estate plan. There is a dual need to be sure to closely comply with relevant laws while also maximizing the amount that is passed on to the next generation or devoted to charitable causes. The proposed changes have caused significant discussion among attorneys and accountants who council clients in this area about how to best proceed and whether existing estate plans should be altered. At this point none of the decisions are final, so it is important to keep an eye on the issues and wait to make any major changes until after the proposals become law.
Source: Star Tribune, “Half of Dayton's tax cuts help Minnesota businesses,” Half of Dayton’s tax cuts help Minnesota businesses,” Neal St. Anthony, March 7, 2014.