Minnesota Changes Estate Tax Requirement

Only one of 18 states, Minnesota still imposes inheritance taxes in addition to the federal estate tax levy. Minnesota’s estate tax, however, recently became much weaker. The state’s current budget includes $650 million in tax cuts, which involves increasing the estate tax exemption to $2.4 million for the year of 2018 with further increases in future years. The Governor of Minnesota previously vetoed a budget with $1 billion in tax cuts and a state estate tax for individuals within federal estate tax territory. The Governor announced that the most recent reform would be enacted without his signature. This decision comes at a time when many states have begun to either eliminate these types of taxes or increase them. Some married couples have commented that Minnesota’s estate tax does not contain a portability provision, which prevents couples from transferring benefits. At a time when many changes have been made to Minnesota’s estate tax, it is important that individuals understand the important details about the role of estate taxes. 

The Estate Tax Return Process in Minnesota

A person must file estate tax returns in the state of Minnesota if their estate surpasses the rates for individual estate tax exemption. Because these requirements only involve limits, it is important to remember that estates are not always automatically required to file a return. Any type of property that is left to a spouse, however, is considered exempt from state estate tax law. Sometimes expenses can be deducted from estate taxes, which lowers the value of a person’s estate that must be taxed. 

Nonresidents of Minnesota

Nonresidents of the state of Minnesota are also sometimes required to pay estate taxes. Even if a person does not live in the state of Minnesota, assets that a person might have and are physically still in the state are taxed. As a result, a surprisingly large number of individuals living outside Minnesota must file tax returns. 

Gross Estate Tax

All estate taxes in the state of Minnesota begin by determining a person’s gross estate. Gross estates include many different elements like:

  • Bank accounts
  • Investment accounts
  • Life insurance proceeds
  • Ownership rights in a business
  • Real estate
  • Retirement account funds
  • Taxable gifts that the person made during his or her life
  • Vehicles and other physical property

Filing Requirements

In situations in which a Minnesota tax return is deemed necessary, the executor of the estate must file the return within 15 months after the date of the person’s death. Federal estate tax returns must also be properly attached. In many cases, individuals find it essential to obtain  professional help. On average, the tax on a deceased person’s estate must be filed nine months after death. Fortunately, the state of Minnesota is able to accept installment payments provided that an estate is also issuing payments for federal estate taxes. It is important to remember that interest and penalties accrue if a person does not pay this amount. If the Internal Revenue Service grants extensions on a federal tax, estates are often not required to pay late payment penalties on state tax. 

Speak with a Knowledgeable Minnesota Estate Planning Attorney

If you live in the state of Minnesota or have significant holdings in the state foresee the potential of significant estate taxes in the future, it often proves helpful to speak with an attorney who is familiar with the many obstacles that can arise during the estate planning process. Call attorney Steve Welle of O’Keeffe O’Brien Lyson Foss at 701-235-8000 or 877-235-8002 today for help with your estate planning.