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What You Need to Know About the Minnesota Estate Tax

The estate tax rate in Minnesota ranges from 12% to 16%. In 2018, it applies to estates worth more than $2.4 million. This guide gives a full explanation of the estate tax in Minnesota, so you know what to expect when estate planning. If you think you’ll need help, you might consider working with a financial advisor. SmartAsset’s financial advisor matching tool can match you with an advisor who meets your needs.

Minnesota Estate Tax Exemption

The threshold for the estate tax in Minnesota is $2.4 million in 2018. That is scheduled to increase to $2.7 million for 2019 and $3 million for 2020 and after. Any wealth below the exemption is not taxed by the state. Wealth above that mark is taxed in a series of progressive brackets.

Minnesota Estate Tax Rate

Minnesota’s estate tax is graduated, with a series of increasing rates applying as the size of the estate goes up.

Once you know your taxable estate, find your bracket in the table below. The base taxes shows what’s owed on wealth that falls below your bracket. Next, subtract the bottom limit of your bracket from your taxable estate. Multiply that by the marginal rate. Finally, add that amount to the base taxes owed, and you’ll know the total tax burden.

Let’s go over an example. Say your total estate is worth $10.9 million, with the $2.4 million exemption, the taxable estate totals $8.5 million. See where that total falls on the chart below. The base tax is $1.004 million. The bottom of the threshold is $8.1 million. We subtract that from $8.5 million to get $400,000. That amount multiplied by the marginal rate of 14.4% is $57,600. That sum ($57,600) plus the base taxes ($1.004 million) equals $1.0616 million, and that is the total Minnesota estate tax burden.

MINNESOTA ESTATE TAX RATES
Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$1 – $5.1 million $0 12% $0
$5.1 million – $7.1 million $612,000 12.8% $5.1 million
$7.1 million – $8.1 million $868,000 13.6% $7.1 million
$8.1 million – $9.1 million $1.004 million 14.4% $8.1 million
$9.1 million – $10.1 million $1.148 million 15.2% $9.1 million
$10.1 million and up $1.3 million 16.0% $10.1 million

*The taxable estate is the total above the exemption of $2.4 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.

What Is the Estate Tax?

Estate taxes are levied on the estate of a recently deceased person before the money or other property is passed on to heirs. It is sometimes called the “death tax,” and applies to estates worth a particular amount, which varies by jurisdiction.

Don’t confuse the estate tax with inheritance taxes, which are taken from a person’s heirs after the money has passed on to them.

Minnesota Inheritance Tax

What You Need to Know About the Minnesota Estate Tax

There is no inheritance tax in Minnesota. Inheritance taxes from other states could apply to you, though. In Kentucky, for instance, all in-state property that is passed down is subject to the inheritance tax, even if the inheritor lives elsewhere.

Minnesota Gift Tax

Minnesota also has no gift tax, so you’ll only be subject to the federal gift tax. That allows gifts of up to $14,000 to individuals without any taxes in 2017, and up to $15,000 in 2018.

Minnesota Estate Tax for Married Couples

The Minnesota estate tax is not portable for married couples. When both spouses die, only one exemption of $2.4 million can be applied.

Federal Estate Tax

On top of the Minnesota estate tax, there is the federal estate tax – but it has a much higher exemption. As of 2018, the exemption sits at $11.18 million, and it is portable between spouses. This means that with the correct legal maneuvering, a couple can protect up to $22.36 million from the federal estate tax after both spouses have died.

The top tax rate is 40%. Use the method described in the Minnesota Estate Tax Rates section and the chart below to figure out your federal estate tax burden.

FEDERAL ESTATE TAX RATES
Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$1 – $10,000 $0 18% $1
$10,000 – $20,000 $1,800 20% $10,000
$20,000 – $40,000 $3,800 22% $20,000
$40,000 – $60,000 $8,200 24% $40,000
$60,000 – $80,000 $13,000 26% $60,000
$80,000 – $100,000 $18,200 28% $80,000
$100,000 – $150,000 $23,800 30% $100,000
$150,000 – $250,000 $38,800 32% $150,000
$250,000 – $500,000 $70,800 34% $250,000
$500,000 – $750,000 $155,800 37% $500,000
$750,000 – $1 million $248,300 39% $750,000
Over $1 million $345,800 40% $1 million

*The taxable estate is the total above the exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.

Overall Minnesota Tax Picture

What You Need to Know About the Minnesota Estate Tax

Minnesota is not a particularly tax-friendly state for retirees. Social Security income is taxed, as is all income from retirement accounts and pension. Minnesota’s income tax rate is progressive, with rates ranging from 5.35% to 9.85%. These are among the highest in the country. On the other hand, Minnesota property tax rates average 1.17%, fairly close to the national average.

You can use this Minnesota paycheck calculator to estimate your take home pay in the North Star State.

Sales tax in the state ranges from 6.875% – 8.375%, putting the state in the top 20 nationwide.

Estate Planning Tips

  • Taxes can be a lot to think about, especially if you’re dealing with an estate. If it’s a bit overwhelming, you may want to consider finding a financial advisor to help you figure out how to make the best decisions for you and your family. SmartAsset has a financial advisor matching service that will set you up with the best advisor for you. Answer a few questions about yourself and your financial situation, and our program will match you with up to three advisors who might be a good fit for you. They’ll get your information and will contact you to see if you want to work with them. All of advisors on our platform have been fully vetted and are free of disclosures. They are also all  registered financial advisors.
  • When planning your estate, you should know how much you will have saved when you reach retirement. You can use our retirement calculator to help you figure that out.
  • It’s worth considering whether you should establish a trust. A trust will allow you to control and designate which of your assets are passed on to which of your beneficiaries. There are different trusts that might be better for you, depending on your finances. For example, you could establish a testamentary trust or a living trust. This is another factor that a financial advisor can help you come to a decision on.

Photo credit: ©iStock.com/AndreyPopov, SmartAsset, ©iStock.com/AndreyKrav

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing. When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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