Minnesota is one of twelve states that imposes an estate tax. In 2025, the Minnesota estate tax exemption is $3 million per person. If you are a Minnesota resident, or own property in Minnesota, here is a breakdown of what you should know:
What Is an Estate Tax?
An estate tax is a tax on the transfer of assets from a deceased person to their heirs or beneficiaries. It is assessed on the value of the deceased person’s estate as of their date of death, which includes all property, investments, cash, real estate, and other assets.
Minnesota’s Estate Tax Exemption
Minnesota imposes its own estate tax in addition to the federal estate tax. However, not all estates are subject to this tax. As of 2024, the Minnesota estate tax exemption is $3 million per individual. This means that if the total value of your estate is below $3 million, your estate will not owe Minnesota estate taxes. Because this exemption is per person, in the cases of married individuals, each spouse may have $3M in assets without triggering an estate tax. There is also a marital deduction that allows an unlimited transfer of assets between spouses. Any taxes ultimately owed would be deferred until the death of the surviving spouse, if appropriately planned and documented.
If your estate exceeds this exemption amount, only the portion of the estate above $3 million will be subject to the state’s graduated tax rates, which range from 13% to 16%.
Federal Estate Tax vs. Minnesota Estate Tax
The federal estate tax exemption is significantly higher—$13.99 million per person as of the date of this article. This discrepancy means that many estates that are exempt from federal taxes may still owe estate taxes in Minnesota. Notably, the federal estate tax exemption is portable, while Minnesota’s is not. Meaning, in Minnesota, each individual’s exemption must be utilized separately; any unused portion does not transfer to the surviving spouse.
What Assets Are Included in Your Estate?
To determine if your estate exceeds the $3 million exemption, you’ll need to calculate the total value of your assets. This includes:
- Real estate
- Bank accounts and investments
- Retirement accounts (e.g., 401(k)s, IRAs)
- Life insurance policies (if owned by the deceased)
- Business interests
- Personal property, such as vehicles, art, and jewelry
Strategies to Minimize Estate Taxes
If your estate is close to or exceeds the $3 million threshold, there are strategies you can employ to reduce your tax liability:
- Gifting During Your Lifetime: As of 2025, you can gift $19,000 to any individual annually without paying tax. There are additional gifting strategies to reduce the size of your taxable estate.
- Establishing Trusts: Certain types of trusts, such as irrevocable life insurance trusts (ILITs), spousal trusts, or qualified terminable interest property trusts, can help minimize estate taxes.
- Disclaiming After Death. If a married couple did not properly plan during their lives, a surviving spouse has the ability to disclaim a portion of the deceased spouse’s assets.
- Charitable Contributions: Donations to qualified charities can lower the taxable value of your estate.
Final Thoughts
Understanding Minnesota’s estate tax is essential for effective estate planning. With its relatively low exemption threshold, many estates may be subject to state taxes even if they fall below the federal threshold. By taking proactive steps, you can ensure that your legacy is preserved and passed on according to your wishes.