Estate taxes are paid by a decedent's estate, which means heirs to the estate lose out of benefits. There are ways to reduce or avoid estate taxes, but they do not always apply. Speaking to an experienced estate planning attorney in Minnesota is the best way to create a plan that benefits you today and protects your loved ones tomorrow.
Estate law can get pretty complex and undergoes changes relatively often, making it hard for clients to stay current. At the Law Firm of Neil Thompson, our estate planning lawyer will thoroughly review your estate and advise you accordingly. We know that informed clients make the best decisions about their finances. Contact us today either online or at 612-246-4788 to schedule a Free Initial Consultation.
What is an Estate Tax in Minnesota?
Some states have an estate tax that must be paid when a person dies. This tax applies regardless of who inherits. Typically, the executor files a single estate tax return and pays the tax out of the funds of the estate.
An estate tax differs from an inheritance tax in that the beneficiary (or person inheriting from the decedent) is responsible for paying an inheritance tax. An estate tax and an inheritance tax are both different from a gift tax, which only applies to transfers that are made during the giver's lifetime.
Understanding Minnesota Estates: State versus Federal Estate Taxes
Some states have an estate tax, while others have an inheritance tax, and still others have neither. However, there is a federal estate tax that is applicable to all states. Fortunately, the exemption amount is so high most people do not have to pay a federal tax.
For the year 2023, the federal exemption for an individual is $12,920,000.00 million, which means that they may leave their beneficiaries up to $12.920 million in property without having to pay any federal estate tax.
The Minnesota state exemption for an individual is $3 million, which means an estate net valuation of more than $3 million will incur substantial Minnesota estate taxation without proper planning.
Who Pays the Estate Tax?
When someone dies, there is a person that is appointed in the decedent's Will, or by the court if there is no Will, that is in charge of administering the estate of the deceased. In some states, this person is known as the personal representative while in others they are known as the executor.
No matter what they are called, this is generally the person that is responsible for handling the payment of the estate tax. It is paid from the estate prior to its being distributed among the beneficiaries.
How to Avoid Estate Taxes
There are different ways to avoid having to pay an estate tax, including:
- Gifting property to family members
- Creating a trust
- Donating property to a charity
Which of these ways, if any, can apply will depend on the state and circumstances of each individual situation.
Benefits of Hiring an Estate Planning Lawyer in Minnesota
An estate planning attorney is a lawyer that focuses their practice on helping clients create comprehensive estate plans that meet their short- and long-term goals. Benefits of having an estate planning lawyer on your side include:
- You have the peace of mind in knowing that your plans are compliant with local, state, and federal law.
- Your initial thoughts on what you desire in your estate plan may not be the best for your situation, and an estate planning lawyer will know this and explain better options to you.
- When you hire an estate planning attorney, your estate plan will be customized to address your unique needs.
Spending some money up-front on an estate planning lawyer can end up saving significant time and money down the road.
Contact an Estate Planning Lawyer in Minnesota Today
It is always to your advantage to speak with an estate planning attorney in Minnesota about your estate and what documents should be included in an estate plan. Our goals at the Law Firm of Neil Thompson are to make sure you benefit from an estate plan today and your family (and other loved ones) benefit when you die. Contact our estate planning lawyer online or at 612-246-4788 to schedule a Free Initial Consultation and to get started on a smart estate plan.