Understanding MN and Federal Laws helps Minimize Estate Taxes

Published On: 18th November 2013

From The Internet

When you plan your estate, it is important to understand the federal and Minnesota estate tax laws. There are some states that have estate taxes and others that have inheritance taxes. In Minnesota, the tax is an estate tax.

Federal estate tax law allows an individual to use the marital deduction so that an unlimited amount of assets can be left to the spouse tax-free as long as the spouse is a citizen of the United States. This defers any potential gift or federal estate tax until the last surviving spouse passes away.

Individuals are able to leave estates up to a specific amount to heirs who are not spouses without having to pay any estate tax. Any portion of the excluded amount that is not used by the predeceased spouses’ estate may be added to the surviving window’s exclusion or estate. This isn’t an automatic process, however. The executor of the estate must transfer the unused portion of the excluded amount by filing a federal estate tax return. This has to be done even if there is no tax due when the surviving spouse desires to maintain the unused portion of the excluded portion. By using this exclusion, the married could can double the exclusion from federal estate taxes. This is an amount that can change each year because it is adjusted for inflation.

Under the current law, individuals are able to make gifts up to a certain amount without it reducing the lifetime exclusion. Any gifts that exceed the specified amounts must be reported on the personal tax return and the amount would be subtracted from the lifetime exclusions. Two spouses together double the individual amount. Gift giving like this can make sense when it is possible for the estate to exceed the exclusion limits, especially when the state(s) where beneficiaries live have an inheritance tax.

In Minnesota there is a state estate and gift tax in addition to federal tax. Estate taxes are levied on the entire estate before it is distributed.

If you own property in multiple states, it is important to talk about estate taxes with your attorney. The reason why this is important is because state taxes can differ from state-to-state. You can expect your particular case to be looked at carefully by tax auditors in the states where you own property so they can determine that your domicile is where you say it is. For instance, they will see where your family home is located, where you vote, the clubs you hold memberships with, and what churches or religious organizations you belong to. Your attorney will be able to advise you on the steps that you can take to minimize the tax on your estate.

Minimizing tax liability is not an un-American thing to do. It is important that you are able to pass on as much as what you have worked for as you can. You want your family to receive the maximum benefit and it is your right to ensure that.

Source: http://www.chicagotribune.com/business/sns-201311051930–tms–savingsgctnzy-a20131105-20131105,0,4995133.story