Will Minnesota Lose its Position as a State with a Scary Death Tax?

Published On: 7th May 2014

From the internet

The top 10 states with the scariest death taxes were revealed in a Kiplinger’s report and Minnesota made the list at number 3. It secured this position because of its 5.6 percent tax for estates valued at $1 million or more. This sounds like a lot of money, but it includes everything from the house and the vehicles to the retirement funds and the insurances. Minnesota even backtracks a little and looks at the taxes on gifts that were made in the three years before the death.

$1,000,000 is a lot of money, but looking at the whole of someone’s life, just how big is it? There are many senior citizens throughout the state in their 80s and 90s and even some that have reached the century mark. Imagine what a loaf of bread cost when they were young. In their lifetimes, the cost of a loaf of bread has increased 10 or 20 times and now a dollar can only purchase a slice of bread in some instances. This means that the amount to be taxed has remained the same, but the purchase power has decreased over the years. All of the factors that make an estate subject to taxation have inflated over the lifetime of the person.

This makes it rather clear as to why the Minnesota death tax has been the subject of a lot of chatter and why Governor Mark Dayton signed an Omnibus Tax Bill that alters both gift and estate tax.

Up until this point, groups were bringing inflation to the attention of the legislature. There was and is also the question as to whether or not the definition of a millionaire is based on dollars in hand or on the dollars that are represented through an individual’s home and other possessions.

The government had put one exemption in place when it comes to estate taxes and it is that the estate value for couples can be doubled. However, at the time of death, there is only one person left, even if the two would die within minutes of one another.

Due to the fact that retirees sometimes need a million or more in order to sustain their lives for up to decades after retirement, that makes them subject to the death tax.

However, the Minnesota gift tax has been retroactively repealed to June 30, 2013. This means that those who made taxable gifts during the last six months of 2013 do not have to file a Minnesota gift tax return.

The Minnesota estate tax exemption was also increased. It has now been increased to $1/2 million for those passing away in 2014 and will continue to increase $200,000 every year until the exemption reaches $2 million. It will reach the $2 million mar in 2018. For those that pass away in 2018 and later, the $2 million will remain constant.

The estate tax rates have also changed. The “bubble tax,” which is a marginal tax rate of 41 percent on the first $100,000 of $1 million in estate assets has been eliminated. For 2014, the estate tax rates will begin at 9 percent on estates that are valued at more than $1.2 million and will increase gradually until it reaches 16 percent.

These are just some of the changes in order to give some relief in regards to the death tax and that just might knock Minnesota out of that #3 position.