Davis Law Firm | Estate Planning Attorneys in Minnesota

Minnesota Gift & Estate Tax Changes for 2013
June 13, 2013

As part of the tax law changes passed by the Minnesota legislature in May, the state of Minnesota will begin imposing a gift tax on all gifts completed by Minnesota residents on or after July 1, 2013.  Prior to the new legislation, Minnesota did not impose a tax on gifts of any amount.  However, the new law limits each individual to effectively shelter no more than $1,000,000.00 from the Minnesota gift tax over his or her lifetime and dictates a flat tax rate of ten percent (10%) on gifts exceeding the lifetime credit shelter amount.  The new gift tax law did not impact the $14,000.00 annual gift tax exclusion amount; accordingly, Minnesota residents may continue to gift up to $14,000.00 each to an unlimited amount of individuals on an annual basis without generating the need to file a gift tax return or pay a gift tax on the transfer.  If you intend to include a gifting strategy as part of your estate plan, you may want to consult with an attorney or other professional prior to July 1, 2013.

Another important aspect of the new tax legislation in Minnesota is the changes that were made to the Minnesota estate tax laws.  The legislature included a three year “pull-back” provision which includes the value of any gifts made in three years previous to an individual’s death in that individual’s estate for purposes of calculating the Minnesota estate tax.  As many of our clients use a gifting strategy to avoid estate taxes at their death, this means that gifts must now be completed a minimum of three years prior to the death of the gifting individual in order to avoid the estate taxes which would have been assessed on that asset.

The bottom line is that, after June 30, 2013, each Minnesota resident will effectively be able to transfer up to $2,000,000.00 exempt from state transfer taxes: $1,000,000.00 of lifetime gifts and an additional $1,000,000.00 excluded from estate taxes at death, provided the transfers are completed properly.  The recent legislative session enacted several additional changes to the taxation laws of Minnesota, including an increase in personal income tax rates.  For more information regarding these changes, visit the Minnesota Department of Revenue website.

The information on this site is not intended to provide specific legal advice nor does it create an attorney-client relationship. An attorney-client relationship may only be created through an explicit agreement with our firm.

IRS CIRCULAR 230 DISCLOSURE: To comply with requirements imposed by the Department of the Treasury, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any taxpayer, for the purpose of (i) avoiding penalties that may be imposed on the taxpayer, and (ii) supporting the promotion or marketing of any transactions or matters addressed herein.

Our use of a disclaimer does not change the high degree of care and attention that we devote to our tax advice. Moreover, the inclusion of the disclaimer does not indicate that penalties could be imposed on the transaction at issue, but rather merely indicates that the advice we have provided you in such communication does not preclude the IRS from asserting penalties. Finally, please be assured that the use of such a disclaimer to avoid unnecessary legal expenses is similar to the approach adopted by most other tax practitioners.





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Davis Law Firm, P.A.
3006 Allegro Park Ln SW, STE 3
Rochester, MN 55902

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