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Estates in Minnesota

Estate taxes affect very few estates.   Minnesota allows an exemption of $1,600,000 before an estate tax is charged.  The federal government allows over $5,400,000 to pass at death without payment of an estate tax.  Minnesota has a three year look back regarding the estate tax.  Any transfers within 3 years of death are added back to the estate, to the extent that the gifts exceeded $14,000 per person per year. 

According to Kipplinger, 46 other states are friendlier than Minnesota for the estate tax. 

What can a person do to avoid estate taxes?

1.  The simplest solution is to make gifts, as much as $14,000 per person per year, can be given without gift or estate tax consequence.

2.  A couple can create disclaimer trusts  in their Will or Trust.  Then, the survivor can disclaim some inheritance to the trust, which operates as a reserve fund, but it is not taxed at the second death.  

3.  Life insurance can be given away, or transferred to a life insurance trust.

4.  Interests in some property can be reduced if the property is owned with others in well prepared partnership arrangements.

5.  Moving to a tax friendlier state.  Wisconsin works!

Be aware, however, that simply moving to another state will not necessarily avoid all Minnesota estate taxes.  If a full time resident of another state continues to own Minnesota real estate, Minnesota will claim an estate tax.  First, a tax is computed as if all property was located in Minnesota, then that tax is reduced by multiplying by this fraction: the value of the Minnesota real estate divided by the total value of all property in the estate.