2014 Changes to Minnesota’s Estate and Gift Taxes

Estate Tax

On March 21, 2014, Governor Dayton signed a tax bill (H.F. 1777; Minnesota Laws, Chapter 150) that will gradually increase the Minnesota estate tax exemption from $1.2 million for deaths in 2014 to $2.0 million for deaths in 2018 and thereafter.

Minnesota and the federal government impose an estate tax if you die with assets in excess of the exemption amount. There is no estate tax due if assets transfer directly to a surviving spouse. However, an estate tax is required when assets transfer to non-spouse beneficiaries when the decedent’s gross estate exceeds the applicable exemption amount.

The new Minnesota exemption amounts are as follows:

Year of Death

MN Exemption Amount

2014

$1,200,000

2015

$1,400,000

2016

$1,600,000

2017

$1,800,000

2018 and thereafter

$2,000,000

The federal estate tax exemption is currently $5,320,000 for deaths in 2014 and the top federal rate is 40%. With proper estate planning, a married couple can transfer twice these exemption amounts free of estate tax to their beneficiaries.

Minnesota estate tax brackets have been simplified. The estate tax rates for 2014 begin at 9% on estates over the exemption amount and incrementally increase to a maximum of 16% on estates over $10,100,000. There is no longer a 41% estate tax bracket between $1,000,000 and $1,093,000. In 2013, the estate tax due on a $2.0 million estate was $99,600 and this amount will decrease to $78,000 for 2014 deaths, $60,000 for 2015, $40,000 for 2016, $20,000 for 2017 and no tax for 2018 or later deaths.

Gift Tax

In 2013, the Minnesota legislature levied a gift tax for taxable gifts made on or after July 1, 2013. H.F. 1777 retroactively repeals the Minnesota gift tax to its effective date of July 1, 2013. These changes do not affect the requirement to file a federal gift tax return. Taxable gifts (currently, any gift in excess of $14,000) made within three years of a decedent’s death will continue to be included in the taxable estate for purposes of determining Minnesota estate tax due.

The information included in this article is intended to provide general information regarding the 2014 changes to Minnesota estate and gift tax laws and does not constitute legal or tax advice. To review your personal estate planning situation, please contact Maser, Amundson, Boggio & Hendricks, P.A. to meet with an attorney.

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