Minnesota, like 10 other U.S. states and the District of Columbia, charges its own estate tax in addition to the federal estate tax. The rest of the state’s inheritance laws, though, are fairly standard and match the policies most other states have in place. If you want help navigating the complexities of estate planning, SmartAsset’s free financial advisor matching tool can pair you with up to three advisors who serve your area.
Does Minnesota Have an Inheritance Tax or Estate Tax?
Minnesota does have an estate tax for residents and individuals who own property in the state at the time of their death. This only applies to estates that are $3 million or more in gross value. Rates range from 13% to 16% depending on how far the estate exceeds the aforementioned tax exemption amount. There’s no inheritance tax in the state, though.
You must file your Minnesota state estate tax return within nine months of the individual’s passing. However, the state realizes that this can be a delicate time for many families, likely making worrying about finances less of a priority. To accommodate this, you’ll get a six-month extension for these returns, should you ask for it.
Other Necessary Tax Filings
Paying the Minnesota estate tax is not the end of your tax-paying venture when handling an estate. In fact, you’ll need to file all of the following returns as well:
- Final individual federal and state income tax returns: each due by tax day of the year following the individual’s death
- Federal estate/trust income tax return: due by April 15 of the year following the individual’s death
- Federal estate tax return: due nine months after the individual’s death, though an automatic six-month extension is available if asked for prior to the conclusion of the nine-month period
- This is required only of individual estates that exceed a gross asset and prior taxable gift value of $12.06 million ($24.12 million for married couples)
Estates are not people, so they obviously don’t come with a prespecified Social Security number you can use for identification purposes when you file your taxes. In order to ensure that you can pay taxes on the estate, you must file for an employer identification number (EIN). You can find this online on the IRS website or apply by fax or via mail.
Dying With a Will in Minnesota
Having a will when you pass away in Minnesota, or any other state, is the least complicated and most beneficial way to disburse your property to your desired heirs. The inheritance decision process is the part of a will that everyone always thinks of. But making sure you have a clear, and most importantly, valid will in the eyes of the law requires following a couple rules.
First off, you must personally sign the will. You can have someone else sign it for you only if you are physically unable to do so. As another protection, Minnesota inheritance laws dictate that at least two other individuals who are at least somewhat familiar with your will must sign it after witnessing your signature. The state will consider those who comply these stipulations “testate.”
All valid will also includes the naming of an executor. This individual will essentially be the caretaker of your estate after you die. The person will not only handle executing the will as you have laid out, but he or she will manage any outstanding debts or final expenses your estate might incur.
Dying Without a Will in Minnesota
Not having a valid will in place at the time of your death leaves the heir decision process completely up to the Minnesota court system. If this describes your situation, your bequest plans will be deemed “intestate,” which is the legal term for estates without a valid will. As a result, the state’s intestate succession laws will then come into play.
These detailed laws describe in what order your relatives will receive the property in your estate, depending on which family members survive you. But because you have no legal will, and therefore no executor to take care of and distribute your estate, the court will appoint one for you. A judge won’t choose just anyone to fill this void. In fact, the ideal candidate will have some familiarity with you and your surroundings.
If this process sounds unpleasant, and you’d rather maintain control of where your property ends up, just write a will. You could take care of it on your own, but for anyone who’s nervous and wants professional guidance when it comes to Minnesota inheritance laws, consulting a financial advisor or attorney would be helpful.
The Probate Process in Minnesota
Probate is the process by which a court decides if a will is valid or not and how to handle the management of its property depending on the answer to that question. According to Minnesota inheritance laws, estates must go through probate court if they fall under specific preconditions.
A dead giveaway for a probate estate is if its property includes any real property. As you might imagine, this type of property includes land, homes and other structures affixed to the ground in Minnesota. It doesn’t matter if you’re a resident of the state and you own a home or if you reside anywhere else and have additional real estate in Minnesota, you’re still required to file for probate. The only exception to this rule is if the property is jointly-owned, in which case it’ll likely pass to the co-owner.
Personal property is every other piece of property located in an estate, like jewelry, vehicles, valuables and furniture. If an estate has no real property, but less than $75,000 worth of personal property, you can avoid a probate proceeding by filing an Affidavit for Collection of Personal Property. Any amount over that, and the probate court must be involved. To file for this, heirs must wait until 30 days have passed since the individual’s death, according to Minnesota inheritance laws.
Spouses in Minnesota Inheritance Law
Estates of intestate individuals who die with solely a surviving spouse or a surviving spouse and children only with that spouse will have the property distributed solely to those heirs.
However, things drastically change if either you, your spouse or both of you have children from a previous relationship. In any of these three cases, your surviving spouse will receive the first $225,000 of your intestate estate and half of anything left over beyond that. The rest is handed to your biological or adopted children.
Children in Minnesota Inheritance Law
If you die intestate without a surviving spouse, your children receive your entire estate. This is the only only situation with an intestate estate in which they’ll receive everything. Beyond this, things become a bit more complex.
When a situation arises where your surviving children were born both of your spouse and another person, your spouse will get the first $225,000 worth of your estate, along with half of whatever’s left over. Only after this will all of your children take the other half of your estate.
The same exact rule applies to your estate if your surviving spouse had your only children with you, but also had others with someone else. Though it might be obvious, solely your offspring are entitled to your estate, no matter how many children your spouse had before you came along.
|Intestate Succession: Spouses & Children|
|Inheritance Situation||Who Inherits Your Property|
|– If spouse, but no children||– Entire estate to spouse|
|– If spouse and children from within the relationship only||– Entire estate to spouse|
|– If spouse, children from within the relationship and one or both of you have children with another person||– Spouse receives first $225,000 of estate, and half of the leftover |
– Balance to your children
In the eyes of Minnesota intestate succession law, children who are adopted by an individual or couple maintain the same inheritance rights as a biological child. On the other hand, foster children and stepchildren do not receive the same perks if they were never adopted into your family.
Biological children that you give up for adoption, though, do not hold any legal rights to your estate in the eyes of intestate succession law, according to Minnesota inheritance laws.
The only way intestate succession in Minnesota will result in your grandchildren receiving your estate is if your child (their parent) predeceased you.
Children born within a marriage are presumed to be the biological descendants of the father. So even if any infidelity has occurred in your marriage and the child that possibly resulted from that affair is considered part of the family, he or she still receives a portion of your intestate estate.
Any children that were conceived before their parent’s death, but were born after and lived at least 120 hours, are considered normal heirs to the decedent’s estate. A child born via the use of any form of assisted reproduction is also titled as a biological heir, so long as the mother was pregnant at the time of the father’s death, according to Minnesota inheritance laws.
Unmarried Individuals Without Children in Minnesota Inheritance Law
For anyone who dies without a surviving spouse or surviving children, his or her estate could fall into any number of their relatives’ hands. Exactly who gets most or all of its contents is dependent on who survives you and how many people will split the property. Minnesota’s intestate succession prescribes the following process:
|Intestate Succession: Extended Family|
|Inheritance Situation||Who Inherits Your Property|
|– If parents, but no spouse or children||– Entire estate to parents|
|– If no parents||– Entire estate to siblings|
|– If no siblings||– Estate split evenly between paternal/maternal grandparents|
|– If no grandparents||– Estate split evenly between paternal/maternal aunts and uncles|
|– If no aunts and uncles||– Estate split evenly between nearest relative, such as cousins|
While it remains a distinct possibility that the state of Minnesota could “inherit” your estate, the intestate succession process is meant to turn make every attempt to ensure that at least one relative gets your property.
Non-Probate Minnesota Inheritances
When you open certain types of policies and accounts throughout your life, they require the naming of a beneficiary. This title is intended to dictate who will receive the inheritance related to the asset should you pass away. Therefore, Minnesota inheritance laws treat the following accounts as non-probate:
- Life insurance payouts
- Pay-on-death bank accounts
- Transfer-on-death investment accounts
- Property within a living trust
- Unused IRAs and other retirement accounts
- Joint tenancy property
- Transfer-on-death real property
If you’re satisfied with your current beneficiaries, you don’t have to change anything to keep them in that place. But for those that would rather have their will or the intestate process decide where these assets end up, change your beneficiaries to your own personal estate.
Other Situations in Minnesota Inheritance Law
Half-blooded relatives are afforded the same level of inheritance rights as any of their full-blooded counterparts when it comes to Minnesota inheritance laws. So according to Minnesota intestate succession, if you have two brothers and you share only a father with one of them, they remain equal.
Minnesota inheritance laws employ an 120-hour survivorship period that is required to complete before a legal intestate inheritance can be passed on to a relative.
If a niece, nephew or any other type of relative is conceived prior to your death but born after, he or she will maintain the same inheritance rights as anyone born while you were alive. However, the person must live for no fewer than 120 hours after birth. Although this will usually apply to posthumous children of a decedent, the same goes to any relative who is a potential heir.
Just because an intestate heir lacks U.S. citizenship or is an undocumented immigrant doesn’t preclude the state from making him or her a legal heir, according to Minnesota inheritance laws.
Resources for Estate Planning
- Managing your own estate, or handling the intricacies of inheriting money from the estate of a loved one who has passed away, includes many complex factors to consider. It can be such an overwhelming venture that you might want some professional help from a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Attorneys and financial advisors can be expensive, so some people may opt to create their estate plan on their own. However, there are a number of DIY estate planning mistakes you’ll want to avoid at all costs.
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