Last week the Minnesota Legislature wrapped up its session for 2013 by approving an omnibus tax bill that will have a major impact on Minnesotans looking at gifting as part of their estate planning.
By brief way of review, up until last week Minnesota has not had a gift tax. Federal tax law imposes a gift tax of 40 % on gifts made in excess of the annual gift tax exclusion amount ($14,000 in 2013). However, under federal tax law a person can use a portion of their unified lifetime credits to avoid paying tax on such gift tax in that year. The unified credit enables you to give away $5 million (adjusted for inflation so actually $5.25 million in 2013) during your lifetime without having to pay gift tax. Using the unified credit during life will reduce the amount available to offset any estate tax, if any, upon your death.
From the initial reading, a Minnesota Gift Tax of 10 % will apply to all gifts made by Minnesota residents making gifts of real or personal property located within Minnesota. The law requires the person making the gift (donor) to file a gift tax return and pay such tax. The law allows for a lifetime credit of only $100,000.00 from the imposition of the gift tax and becomes effective on all gifts made after June 30, 2013. You can read more by scrolling to page 316. http://www.senate.leg.state.mn.us/journals/2013-2014/20130520062.pdf#page=514
Stay tuned for future blog posts that discuss the new Minnesota Gift Tax once Minnesota estate planning attorneys have had a chance to see the law in action.