Is there a state-level estate tax in Minnesota?

When a person dies, their loved ones may not initially think of all the financial logistics they now face. This goes beyond simply paying for funeral costs and distributing assets per a person’s will or trust. It also includes possibly paying taxes to the Internal Revenue Service. The threshold for who must pay federal estate taxes is high, so many people will not have to worry about this tax. However, they should know that some states levy estate taxes. Minnesota is one of these states.

Minnesota does have an estate tax. This is a tax on the value of the deceased’s property before the property is distributed to the deceased’s heirs. This tax is paid out of estate assets. Depending on state requirements, this tax may be paid to the IRS or to the state where the deceased resided. The threshold for who must pay state estate taxes is often not the same as the threshold for who must pay federal estate taxes.

However, unlike some other states, there is no inheritance tax in Minnesota. This is a tax on what a person inherits. Essentially, it taxes the heirs, not the deceased’s estate. In general, heirs subject to an inheritance tax need not include the inheritance as income on their annual federal income tax filings, with some exceptions. If it is the case that income tax must be paid on an inheritance, it is paid to the state where the heir resides, even if this is different than the state where the deceased resided.

When it comes to estate taxes, the laws can vary by state. And, even in states with an estate or inheritance tax, the laws regarding these taxes can be complicated. Therefore, Minnesotans should not rely on the general information in this post as legal advice, but instead should seek professional guidance for their estate tax questions.