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Minnesota Legislature may take up changes in gift and estate taxe

With the Minnesota Legislature back in session, changes could be made in several areas that could impact Minnesota residents. Among these potential changes are alterations to the State's gift tax and estate tax exemptions, which could change how individuals approach their will planning.

The session is expected to be short, with some hoping to close it by the time Easter rolls around. The Governor has proposed eliminating a gift tax that was enacted last year, as well as increasing the State's estate tax exemption from $1 million to $2 million.

The gift tax is imposed in an amount of 10 percent of a taxable gift. The statute also provides for a lifetime credit of $100,000 which applies to taxable gifts made during the person's lifetime.

If the person who gives the gift does not pay the tax at the time it is due, the person who receives the gift is liable for the tax. The tax also applies to certain transfers of property out of the State.

The potential changes could impact a person's estate plan. Typically, the elimination or reduction of taxes is one of the primary goals of estate planning.

While it remains to be seen whether the proposed changes will actually be enacted, the potential changes illustrate why it is essential that individuals not only create an estate plan in the first place, but update their plan over the years as changes occur in a person's family and in the law. These changes can drastically alter the advantages or disadvantages of a particular strategy in a person's estate plan, and therefore individuals need to stay on top of the continual changes to make sure their plan continues to meet their goals.

Source: Pioneer Press, "Minnesota Legislature's return off to quick start, House adds $20 million in propane, heating aid," Doug Belden and Bill Salisbury, Feb. 25, 2014

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