People creating estate plans typically need to address numerous challenging matters. They have to choose who inherits property and who administers their estate. They may even need to make careful plans to preserve their resources and optimize what their beneficiaries inherit.
Estate taxes are notorious for consuming people’s legacies and diminishing what beneficiaries inherit. Advance planning can help people preserve as much of their property as possible for their heirs and beneficiaries instead of state and federal coffers. How much of an estate is typically vulnerable to estate taxes?
The tax rate is progressive
To determine how much an estate may need to pay in estate taxes, it is first necessary to determine the overall value of the estate. People in Minnesota may be subject to both state and federal estate taxes. Statutes allow people to exempt up to a certain amount of estate property from taxation.
In 2025, the limit for exemption at the federal level is $13.99 million. The state estate tax exemption threshold is much lower, as it is just $3 million in 2025. The tax rate that applies depends on how much the overall value of the estate exceeds that threshold.
Currently, the lowest federal estate tax rate that applies is 18%. It increases with the value of the estate, with the top rate being 40%. The state estate tax rate is between 13% and 16%, depending on the value of the estate. Prior planning can theoretically reduce the tax rate that applies or protect the estate from estate taxes completely.
Recognizing the profound impact that estate taxes could have on an individual’s legacy could help them protect their resources and their beneficiaries. Strategic gifts, transfers to trusts and other estate planning strategies can help testators optimize what their beneficiaries inherit.