As noted, the gift tax, which was just enacted last May, has been eliminated. MN no longer taxes gifts. However, gifts are still subject to the federal gift tax.
The most significant changes were to the Minnesota estate tax. Currently, the exemption amount in Minnesota is $1 million dollars. That means all estates in excess of $1 million are subject to Minnesota estate tax. The tax rate varies from between 5% to 16%. However, because of the way the tax is calculated, it can be as high as 41% on smaller estates - what is known in estate planning circles as the “bubble rate”.
Under the new law, the estate tax exemption increases from $1 million dollars to $2 million dollars over 5 years. How much the exemption increases varies each year. The tax rate also adjusts each year with ending rates of from 10% to 16% with the elimination of the bubble rate.
Due to the exemption amount and the rates adjusting over five years, anyone with an estate over $1 million dollars should still undertake estate tax minimization strategies to ensure the maximum estate tax savings.
We will keep you updated as the law changes.
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