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Probate and Estate Litigation Blog

How the Minnesota estate tax gets figured

Last week's post on this blog discussed how the Minnesota estate tax differs slightly from the federal estate tax. The post also discussed how the estate tax Minnesota can present issues that lead to probate litigation. With that in mind, it may be helpful for our Saint Paul, Minnesota, readers to understand more about how the estate tax is figured.

Only a handful of estates in Minnesota actually are subject to the estate tax. If the value of the estate is less than $1.6 million, then the estate is exempt from the Minnesota estate tax, and the heirs of such an estate need not worry about paying. Assuming that the estate has been planned properly, spouses can, by transferring to each other, effectively double their combined exemption to $3.2 million.

Those estates that do happen to be valued over the exemption amount will be subject to a tax that, in 2015, was between 10 percent and 16 percent of the value of the estate that is above the exemption amount. Minnesotans should also be aware that, relatively recently, the state passed a law that will effectively assume that any large gifts made within 3 years of a resident's death were made to avoid paying estate tax. Therefore, such gifts will be counted as assets of the estate during the estate valuation process.

As one might be able to see by reading this, a lot depends on a correct and complete valuation of an estate. While estate valuation obviously affects how much an heir will receive from an estate, it also potentially affects how much of an estate will have to go to pay off estate taxes. It is therefore important for a person who has concerns about whether an estate is being valued correctly to know his or her legal options.

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