As you get deeper and deeper into the estate planning process in Minnesota, you begin to recognize those opportunities where you may be able to minimize the liabilities facing your estate (thus preserving more assets for your beneficiaries). Yet throughout the entire process, one thought may stay fixed in your mind: No matter what you do, your estate will be subject to taxes.
Yet is that actually the case? The answer depends on the total taxable value of your estate, as well as (unrelated as it may seem) your marital status.
Breaking down estate tax exemptions
Both the federal and Minnesota state governments offer an estate tax exemption. At the federal level, the exemption threshold is $11.7 million; at the state level, it is $3 million. If your estate’s total taxable value falls below both of those amounts, it will not owe any taxes at all.
Understanding estate tax portability
Married couples may also be able to extend their exemptions even further. Estate tax portability permits couples to share their estate tax benefits. The federal government offers another tax benefit that (when used in combination with the estate tax exemption) might allow you and your spouse together to protect as much as $23.4 million.
Here is how: Leaving all of your estate to your spouse allows those funds to pass tax-free due to an unlimited marital deduction, which preserves all of your estate tax exemption. According to the Internal Revenue Service, your spouse can then file an estate tax return within nine months of your death and elect portability. This allows your spouse to combine your entire $11.7 million exemption with his or her own.
The state of Minnesota itself does not allow for local estate tax portability. Keep in mind also that the dollar amount of each exemption is subject to change due to changes in law.