There may be a general perception that complex estate planning is only for particularly wealthy people. Realistically, that’s not the case. No matter how sizable a person’s assets are, it may be important to designate beneficiaries in order to reflect personal wishes, rather than inheritance laws enforced by the state government.
At the same time, legal observers point out that many people may not understand how the law will actually affect their estate. Specifically, middle-class families in Minnesota may be subject to the estate tax, even though they may not think of themselves as exceptionally wealthy. Taking all of a person’s assets into account, including life insurance policies, it might be easier to hit the $1 million mark than a person might expect.
Estates that meet or surpass the $1 million threshold are taxed at a rate of 10 to 15 percent by the state. As such, families may unexpectedly be hit with a big tax bill after losing a loved one. This isn’t the kind of surprise a person wants, knowing that inherited assets may be necessary to help provide support to children or family of the deceased.
In order to accommodate for the possibility of state taxes on estates, it may be beneficial to take a look at strategies, such as forming a trust. Through this legal arrangement, a person can administer assets according to his or her wishes, while also making accommodations for tax liabilities.
Taking the time to gain a clear understanding of how state law applies to you and your family can prove to be very valuable, which is something an attorney can help with. Having the knowledge of estate and tax laws can make the best-available options for estate planning much clearer.
Source: MPR News, “Estate tax could also bite the middle-class,” Martin Moylan, Oct. 8, 2013