The Minnesota estate tax exemption is $3 million per individual. If your total estate is under $3 million, your estate generally will not owe Minnesota estate taxes. I say generally because if you make taxable gifts within 3 years of death, the amount of the taxable gift is clawed back to your estate and added to the remaining value. If the claw back amount and the remaining value exceed $3 million, estate tax may be due. If your estate exceeds $3 million, the portion above that amount will be subject to the state’s estate tax, with rates ranging from 13% to 16%. It’s important to note that the Minnesota estate tax differs from the federal estate tax. The federal exemption is $15 million per person beginning in 2026 meaning there are many instances where a Minnesota M-706 Estate Tax Return must be filed but no corresponding requirement to file a federal 706 Estate Tax Return. Also, unlike the federal exemption, the Minnesota estate tax exemption is not portable between spouses, meaning each spouse must utilize their own $3 million exemption separately. This makes proper planning crucial for married couples.
Minnesota allows an additional estate tax exemptions for certain qualified small businesses and farm operates. The additional exemption may be as high as $2 million which means it may be possible to exempt $5 million for qualified businesses and farm operators. Other considerations include the impact of a taxable gift. Although Minnesota does not have a separate gift tax, gifts that exceed the federal annual exclusion ($19,000 for 2025) are clawed back to a decedent’s estate if the gifts are made within 3 years of death. This prevents death bed transfers by a decedent to reduce his/her estate below $3 million.
