Minnesota Awarded 2nd Place in Gift Tax!
In many competitive situations the desire is to often finish in first, second or even third place. To be recognized by all persons present that an achievement has been made. Through hard work, knowledge, use of skills or maybe luck, a standing above all others is worthy.
In many competitive situations the desire is to often finish in first, second or even third place. To be recognized by all persons present that an achievement has been made. Through hard work, knowledge, use of skills or maybe luck, a standing above all others is worthy. It is not for the number of lakes, recorded inches of snow in one season or Caribou coffee locations that MN obtained 2nd place, but because it is now the second state in the United States to impose a gift tax. (Connecticut gets first place.)
The Starting Block
On May 23, 2013, Governor Dayton signed an Omnibus Tax Bill into law that reintroduced a Minnesota gift tax 34 years after the prior gift tax had been repealed.
- Applies to all real and tangible property located in Minnesota held by residents and nonresidents
- The flat tax of 10% will apply to all gifts in excess of a lifetime exclusion total of $1 Million
- The State has adopted Federal tax rules allowing for the annual exclusion of $14,000 for 2013 (adjusted for inflation in subsequent years), gifts to charity, gifts to a spouse and exclusions for direct payments to institutions for medical and education costs.
- Will cause an estate tax return filing if all gifts made within 3 years of a decedent’s death total more than $1 million (after considering the annual Federal exclusion amount)
Enacted in mid May, the law took effect for all gifts made after June 30th, 2013. With only a time-frame of a month and a half, estate and financial planners had to quickly review, revise plans and touch base with all clients that might have desired to give away more than $1 million in 2013 in an effort to reduce their taxable estate.
With very little advance warning from legislature that this was going happen, many taxpayers had been caught off guard and may not have been able to take advantage of utilizing the Federal lifetime exclusion of $5,250,000 for 2013 and may now be stuck with much larger estate than anticipated.
Taxpayers who had accelerated their estate planning and took advantage of gifting opportunities in previous years or early 2013 were able to reduce their Federal taxable estate and avoid the Minnesota gift tax.
Consult with your advisors to create new plans or revise old ones to take the new MN gift tax into consideration when reviewing your gifting strategies and to avoid or minimize the potential tax.
Disclaimer: All content provided in this article is for informational purposes only, and is subject to change. Contact a DS+B professional before using or acting on any information provided in this article