Yes. Minnesota does have an estate tax, and for many Minnesota families, it comes as an unpleasant surprise.
Even more concerning: Minnesota’s estate tax rules are far less generous than the federal rules, and relying on a basic will or revocable living trust often leaves families exposed to a six-figure tax bill that could have been avoided with proper planning.
As a Minnesota and Florida estate and elder law attorney with nearly 30 years of experience, I’ve seen this mistake cost families hundreds of thousands of dollars, even when they believed they had “done everything right.”
Let’s walk through how Minnesota’s estate tax really works and what you can do about it.
Minnesota Estate Tax vs. Federal Estate Tax: A Critical Difference
Federal Estate Tax Exemption (2025)
- $15 million per person for 2025
- Portability is allowed
This means a married couple can combine exemptions and potentially shield close to $30 million from federal estate tax.
Minnesota Estate Tax Exemption
- Only $3 million per person (2025)
- No portability between spouses
This difference is where many Minnesota families get caught off guard.
With no portability, each spouse must use their own $3 million exemption, or it is permanently lost at the first death.
What Counts Toward Your Minnesota Estate?
Many people dramatically underestimate the size of their estate because they only think about “what goes through probate.” That is not how Minnesota calculates estate tax.
When determining whether your estate exceeds the $3 million exemption, Minnesota includes everything you own, including:
- Your primary home (based on fair market value)
- Cabins or vacation property
- Investment accounts
- Bank accounts
- IRAs, 401(k)s, and other retirement accounts
- Life insurance, even if it is paid directly to children or other beneficiaries
- Business interests
- Personal property
If you owned it at death, Minnesota counts it.
Who Is Most Likely to Be Affected by Minnesota Estate Tax?
Minnesota estate tax often impacts people who would never consider themselves “wealthy,” including:
- Married couples with a home and retirement savings
- Families with a cabin that has appreciated significantly
- Longtime Minnetonka, Plymouth, Wayzata, Edina, or Lake Minnetonka residents
- Business owners
- Snowbirds who still maintain Minnesota residency
In today’s market, it is surprisingly easy for a couple to exceed $3 million without realizing it.
Minnesota Estate Tax Rates
If your estate exceeds the exemption, Minnesota estate tax rates range from 10% to 16% on the amount above the $3 million exemption.
That means a $1 million taxable estate could result in a tax bill well into six figures.
“We Have a Revocable Trust. Aren’t We Covered?”
This is one of the most common and costly misconceptions.
Why Revocable Trusts Alone Do NOT Fix Minnesota Estate Tax
A revocable living trust is excellent for:
- Avoiding probate
- Maintaining privacy
- Streamlining administration
However, a revocable trust by itself does NOT reduce or eliminate Minnesota estate tax.
Why?
- Assets in a revocable trust are still considered owned by you
- At the first spouse’s death, everything often rolls outright to the surviving spouse
- The first spouse’s $3 million MN exemption is wasted
- At the second death, the entire estate is exposed to MN estate tax
Probate avoidance and tax planning are not the same thing.
A Real Minnetonka Couple Example
Let me give you a real-world example that mirrors what we see every week.
The Situation
A married Minnetonka couple owned:
- Primary home: $1.4 million
- Lake cabin: $900,000
- Retirement accounts: $1.6 million
- Investment accounts: $400,000
- Life insurance: $300,000
Total estate: Approximately $4.6 million
They had a revocable living trust and believed they were fully protected.
The Problem
Under their original plan:
- Everything passed to the surviving spouse
- The first spouse’s $3 million MN exemption was lost
- At the surviving spouse’s death, $1.6 million would be subject to Minnesota estate tax
- Potential tax bill: over $160,000
The Solution
We restructured their plan using separate trusts with built-in estate tax planning, designed to:
- Preserve both spouses’ $3 million MN exemptions
- Still avoid probate
- Maintain full access and control for the surviving spouse
- Protect assets from remarriage, creditors, and long-term care risks
The Result
- Zero Minnesota estate tax
- Over $160,000 kept in the family instead of paid to the state
Common Minnesota Estate Tax Planning Mistakes
Waiting Too Long
Many families don’t address estate tax planning until after the first spouse has passed, when options are far more limited.
Assuming Federal Rules Apply
Federal and Minnesota estate tax systems are completely different. Planning for one does not automatically fix the other.
Relying on Outdated Documents
Estate plans created years ago often predate changes in Minnesota law and exemptions.
Believing Retirement Accounts or Life Insurance Don’t Count
They do. And they often push estates over the threshold.
Simple but Powerful Planning Concepts That Can Help
“Use It or Lose It” Planning for Married Couples
Each spouse has a $3 million MN exemption, but only if the plan is designed to preserve it.
Separate Trust Planning
Properly structured trusts can lock in the first spouse’s exemption while still providing flexibility and access for the surviving spouse.
Qualified Disclaimers
In some situations, qualified disclaimers can allow post-death adjustments to preserve exemptions if the documents are properly drafted.
Coordinating Beneficiary Designations
Retirement accounts and life insurance must align with the tax plan, not work against it.
These strategies are legal, ethical, and widely used, but they must be implemented correctly.
Why This Matters Now
Estate tax planning is far easier, more flexible, and less expensive before a crisis or first death.
Unfortunately, many Minnesota families only discover the problem when it is too late to fix.
Talk With a Minnesota Estate Tax Planning Attorney
If you live in Minnesota and your total assets are anywhere near $3 million, you owe it to your family to have this reviewed.
At Roulet Law Firm, P.A., we help Minnesota families:
- Avoid unnecessary estate taxes
- Protect their home and life savings
- Create plans that actually work when needed
Call us today to schedule a consultation to discuss your planning at (763) 420-5087 for our Minnetonka, MN office or at (941) 909-4644 for our Florida office. Or simply fill out the contact form on this page, and a member of our team will reach out to schedule your consultation.
A short conversation today could save your family hundreds of thousands of dollars tomorrow.
If you would like to discover more, joins us in our upcoming exclusive masterclass to learn how to avoid proabte, save on taxes, protect the money you leave for your kids in the event they get divorced and much more. Click here to sign up.
