The federal estate and gift tax exemption continues to increase. For the tax year 2024, the estate/gift exemption is $13,610,000 per individual or $27,220,000 for a married couple. The top tax rate for estate taxes remains at 40%. The federal estate tax provisions still include the concept of “portability”. Portability allows a married couple to double the estate tax exclusion. For 2024, married couples are able to protect $27,220,000 without incurring federal estate tax. However, absent action by Congress, the estate tax rates are scheduled to sunset on January 1, 2026. At sunset, the estate tax exemption will revert to 2017 levels plus inflation (estimated to be between $6 million-$7 million. The annual exclusion for gifting has increased to $18,000 per person per year ($36,000 for a married couple to any individual).
The Minnesota estate tax exemption remains at $3.0 million. Unlike the federal estate provisions, there is no portability in Minnesota. The lack of portability increases the importance of balancing assets between spouses. Minnesota estate tax rates range from 13% to 16% with the top rate applied to taxable estate in excess of $10.1 million. The Minnesota farm and small business estate tax exclusion also remains unchanged from prior years. For qualified farmers and small business owners, Minnesota provides an additional estate tax exemption of up to $2 million for qualified farms and small businesses.
Although Minnesota does not have a gift tax, any gifts in excess of the federal gift tax annual exclusion made within three years of death are includable in a Minnesota residence gross estate.This inclusion requirement is intended to prevent a Minnesota tax payer from making a significant gift immediately prior to death to avoid Minnesota estate tax.