Minnesota Tax Law Changes Eliminate Gift Tax – More Details to Follow. (3/24/2014)
On May 20, 2013, the Minnesota Legislature passed the Omnibus Tax Bill, which made significant changes to Minnesota estate and gift tax law.
One major change under the Bill is the imposition of a Minnesota-specific Gift Tax that went into effect on July 1, 2013. This new Gift Tax may have wide-ranging impact on Minnesota taxpayers. Minnesota is only the second state in the country to have its own standalone gift tax. The Bill establishes a 10% Gift Tax on all gifts above the federal yearly gift tax exemption currently set at $14,000. The bill provides for a lifetime gift tax exemption of $1,000,000 per person. This exemption essentially means that a Minnesotan would be able to make $1 million in gifts during his/her lifetime without being subject to paying a gift tax. However, there would be a requirement to file a gift tax return (Form 709) for any gift(s) above the yearly exemption.
Another major change under the Bill is that all “taxable” gifts during the three years prior to a decedent’s passing are includable in their Minnesota estate for the purposes of determining if an estate tax is owed to Minnesota. These changes will also impact end-of-life gifting, which was formerly an effective way of reducing a Minnesota taxable estate.
You should consult with a qualified estate planning attorney to determine if and how the recent gift and estate tax law changes impact your own estate planning needs and goals.