Governor Dayton has asked the legislature to raise the estate tax deduction to $2 million dollars. Currently, estates valued at more than $1 million dollars are subject to Minnesota estate tax. Officially, the estate tax rate in Minnesota runs from 5% to 16% of the value of the estate over and above $1 million. However, due to the way in which the tax is calculated, the effective tax rate can be as high as 41%.
What many people are not aware of is that the value of life insurance owned by your estate at your passing is included in your gross estate for estate tax purposes. So, many families with life insurance meant to take care of minor children in the event a parent passes find they now have taxable estates. Also, many small businesses are subject to the estate tax and find they need to sell the business to pay the tax after the passing of an owner.
By raising the exemption from $1 million to $2 million, the Governor and the legislature would be taking a significant step towards Minnesota becoming more competitive with other states that either do not have an estate tax, or are currently taking steps to eliminate theirs.
Let’s hope that the legislature adopts Governor Dayton’s proposal to raise the estate tax. In other news, the Governor has also proposed changes to Minnesota’s gift tax. To learn more, click here.
If you found this article helpful, share it on Facebook and Twitter.