Death and taxes are known to be absolute certainties, but when people hear about “death taxes,” those two words put together can make some cringe, especially here in Minnesota.
The state is one of several that has a progressive estate tax, which could lead to a hefty bill for some.
Exemption threshold expected to increase
According to Smart Asset, Minnesota’s exemption threshold sits at $2.7 million in 2019 and is expected to increase to $3 million in 2020. If one’s amount of wealth is below that benchmark, they won’t be taxed. Anything above it is taxed based on a series of progressive brackets.
Fast facts about Minnesota estate taxes
In Minnesota, taxes are imposed on the estate of someone who recently died before finances or other assets are passed on to their heirs. According to the Minnesota Department of Revenue, estate taxes currently vary anywhere from a high of 16% to a low of 13%.
It should also be noted that Minnesota does not have an inheritance tax.
How the state compares to others
While the land of 10,000 lakes has also been called the land of 10,000 taxes, its estate taxes can be less burdensome than in some other parts of America.
These are a few other places where death taxes can be costly:
- Maryland: According to recent reports, Maryland may be the most expensive place to die in the United States. That’s because it has both estate and inheritance taxes. Maryland’s estate tax exemption was set at $4 million in 2018 and applied a 16% tax for any value over that amount. However, the state is looking to increase its estate tax exemption to match federal rates, which are known to be more generous.
- New Jersey: New Jersey eliminated its estate tax in 2018, but some beneficiaries in the state may have to pay an additional 16% value tax on any inheritance received. Luckily, immediate family members such as spouses, parents, children, grandchildren and even stepchildren can remain exempt.
- Washington: While Washington does not have an inheritance tax, the state has a 20% estate tax, the highest in the country. However, it only applies to estates that have more than $9 million in value.
Proper planning can help ease the burden
Many Minnesotans don’t want their assets diminished by hefty estate taxes. For those looking to reduce the value of their estate and save more of their hard-earned money, an experienced attorney can help clients create a plan that serves their best interests.