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Minnesota residents seek to lower their inheritance tax burden

Saint Paul residents work hard to earn a living and provide for their families. Many would like to not only provide for their family during their life, but after death as well. However, there are certain obstacles that can complicate these desires, such as the amount of inheritance tax that may be assessed against a person's estate.

Some in Minnesota have criticized the State for not increasing the amount that is excluded from State inheritance taxes. While individuals are exempted up to $5.25 million under the federal estate tax, Minnesota, which is one of the only states with a gift tax, only exempts the first $1 million, meaning individuals must pay inheritance tax on everything above that amount.

While $1 million may sound like a lot, this amount may be reached quicker than many may realize at first, especially once the house, retirement accounts, property and life insurance policies are taken into account. As a result, Minnesota residents are often left scrambling to try to determine how to avoid subjecting their estate to these taxes.

Fortunately, there are estate planning strategies individuals can take to help reduce or eliminate the tax burden they would otherwise face on their estate plan. For instance, by making certain gifts, individuals can reduce the amount of their estate that would be taxed. Each person is entitled to an annual amount, or gift tax exclusion, that helps reduce the size of their estate for tax purposes. Spouses can double their annual gift tax exclusion, further contributing to the lower taxes on death.

There may also be other ways individuals can lower their tax burden, depending on their personal circumstances. Accordingly, individuals should meet with a qualified estate planning attorney to determine what options they may have to lower their estate taxes.

Source: Star Tribune, "St. Anthony: revenue commissioner says business tax cuts and reforms may be in the 2014-15 mix," Neal St. Anthony, Dec. 8, 2013

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