One of the most complicated aspects of creating an estate plan is how to accommodate tax laws. If a will isn’t carefully planned, a person’s heirs could find themselves on the hook for an estate tax bill that is larger than anticipated. This can be especially tricky when accommodating both federal and state taxes.

During the 2013 legislative session, Minnesota lawmakers made changes to the Qualified Small Business Property & Qualified Farm Property Exclusion, which became law two years ago. The law provided a $4 million estate exception for certain small businesses, which is obviously important to those who want to pass the family business on to loved ones.

Under this year’s changes, it’s now easier for Minnesota farm families to pass on their assets with the tax exemption. Now, farmers no longer have to meet strict land-use requirements and there is no need for the beneficiaries to settle on the farm land in order to receive the tax benefit.

The updates to the law serve as a reminder of how important it is to carefully consider beneficiary designations as it relates to the family business. A person may have worked decades to build a business, so it would be unfortunate for business assets to be heavily taxed or become the subject of a dispute.

As the new Minnesota estate tax laws have gone into effect, it may be worthwhile for farm and business owners to review their estate plan to ensure that it reflects the changes. Of course, an attorney can help sort through the crucial details.

Source: Minnesota Farm Guide, “Key changes in MN $4 million estate exclusion,” Gary A. Hachfeld, July 18, 2013