Client Case Study

State Estate Taxes – Often Overlooked

A Simple Move to Save a Quarter Million
In a recent client meeting we were able to suggest a strategy that could potentially save our client $252,000 by simply moving assets from one spouse to the other during their lifetime.

Here is an example of how this works:

A married couple has $4.2 million in assets, all assets are titled in the name of
John and $0 assets are titled in the name of Jane. If Jane passes away first:
  • None of their Minnesota estate tax exemption can be used, since Jane has no
  • assets. Jane will pay zero estate tax.
  • When John passes, their estate will be subject to MN estate tax. The gross
  • estate of John is $4.2 million less the Minnesota exemption of $2.1 million, so
  • the remaining $2.1 million will be subject to Minnesota estate tax at 12% for a
  • total Minnesota estate tax of $252,000.
As we all know, a simple rebalance of client assets can save thousands in estate tax for clients who reside in states with an estate tax such as Minnesota.

To summarize, here are the facts:

  • Most clients will not be subject to estate taxes at the federal level because the exemption is $5.49 million and it is portable so the combined estate tax exemption is $10.98 million for a married couple.
  • Minnesota has:
    – An estate tax with a top rate of 16%.
    – In 2017, the Minnesota estate tax exemption is $2.1 million and there is NO PORTABILITY, meaning that if a deceased spouse does not use their full exemption it is wasted. (Note that the Minnesota estate tax exemption was $1.8 million until mid-year 2017 when it moved up to $2.1 million for 2017. The Minnesota estate tax exemption will increase $300,000 each year for the next three years up to $3.0 million in 2020).

State Estate Taxes Often Overlooked

A Simple Move to Save a Quarter Million

In a recent client meeting we were able to suggest a strategy that could potentially save our client $252,000 by simply moving assets from one spouse to the other during their lifetime.

Here is an example of how this works:

A married couple has $4.2 million in assets, all assets are titled in the name of John and $0 assets are titled in the name of Jane. If Jane passes away first:
  • None of their Minnesota estate tax exemption can be used, since Jane has no assets. Jane will pay zero estate tax.
  • When John passes, their estate will be subject to MN estate tax. The gross estate of John is $4.2 million less the Minnesota exemption of $2.1 million, so the remaining $2.1 million will be subject to Minnesota estate tax at 12% for a total Minnesota estate tax of $252,000.

As we all know, a simple rebalance of client assets can save thousands in estate tax for clients who reside in states with an estate tax such as Minnesota.

To summarize, here are the facts:

  • Most clients will not be subject to estate taxes at the federal level because the exemption is $5.49 million and it is portable so the combined estate tax exemption is $10.98 million for a married couple.
  • Minnesota has:
    – An estate tax with a top rate of 16%.
    – In 2017, the Minnesota estate tax exemption is $2.1 million and there is NO PORTABILITY, meaning that if a deceased spouse does not use their full exemption it is wasted. (Note that the Minnesota estate tax exemption was $1.8 million until mid-year 2017 when it moved up to $2.1 million for 2017. The Minnesota estate tax exemption will increase $300,000 each year for the next three years up to $3.0 million in 2020).