Minnesota's Estate Tax is Not Impacted by the 'Fiscal Cliff' Vote

The "fiscal cliff" vote impacts the federal estate tax only. Minnesotans continue to need to focus on estate planning strategies to avoid Minnesota's state estate tax.

The Congressional vote to avert the so-called fiscal cliff exempts estates of $5 million in value from the federal estate tax. However, Minnesota’s estate tax exemption remains at $1 million and is not expected to change anytime soon.

Given that many Minnesotans do not have $5 million or more in individual assets, most Minnesotans should focus on estate planning strategies to avoid the Minnesota estate tax.         

The $5 million exemption from the federal estate tax is somewhat surprising given that it was $1 million as recently as 2002 and 2003; $1.5 million in 2004 and 2005; $2 million in 2006, 2007 and 2008; and $3.5 million in 2009. It jumped to $5 million in 2010 when Congressional leaders earlier wrangled over various issues, including the estate tax.

Many estate tax observers did not expect Congress to continue the exemption at a level as high as $5 million, which is indexed for inflation.  Large estates will be taxed at a top rate of 40 percent (40%) under the new legislation compared to a top rate of 35 percent (35%) in 2012.

The new 40% rate is low on an historical basis.  The top federal estate tax rate ranged from 45% to 50% between 2002 and 2009. 

©2013 Wittenburg Law Office, PLLC. All rights reserved.

Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.

Bonnie Wittenburg, Wittenburg Law Office, PLLC, Minnetonka, MN  952-649-9771 www.bwittenburglaw.com   bonnie@bwittenburglaw.com


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