Experience

Minnesota Decoupling - Beware: The State Estate Tax Could Cost You!

By Larry Koch

Minnesota estate tax continues to be out of sync with federal estate tax law. As we mentioned in our last Estate Planning Newsletter, the Minnesota legislature in 2002 decided not to adopt changes to the Minnesota estate tax law that would have made Minnesota estate tax law consistent with federal estate tax law. Although a bill to synchronize the Minnesota estate tax with the federal estate tax was introduced in 2003, the Minnesota legislature failed to pass the bill. As a result, during life or at death, a person can pass $1 million dollars free of federal estate and gift taxes, but can only pass $700,000 free of Minnesota estate and gift taxes. Currently, this difference between the Minnesota estate tax law and federal estate tax law could result in a decedent¹s estate paying $33,000 in Minnesota estate taxes. This difference between Minnesota estate tax and federal estate tax requires special planning on the part of clients with estates in excess of $700,000. Clients' Wills and Revocable Trusts should contain special provisions that allow the executor to decide whether or not to pay some Minnesota estate tax in order to take advantage of the full $1 million federal exemption, or to instead only use $700,000 of the federal exemption and avoid paying any Minnesota estate tax. Our lawyers would be happy to explain how the differences between the Minnesota estate tax laws and the federal estate tax laws impact your estate.

Larry Koch has over 25 years of experience in advising clients on a wide range of sophisticated estate planning techniques including, family partnerships, revocable trusts and split dollar life insurance plans. He concentrates his estate planning practice on business owners, executives and individuals with significant retirement benefits. Mr. Koch also represents many businesses, business owners and executives on a variety of corporate legal issues.