Under current law, the manner of calculating a Minnesota estate tax liability sometimes yields surprising results. If a non-resident of Minnesota dies with real property or business assets in Minnesota, and if this “non-resident” owned assets total assets in excess of the Minnesota estate tax exemption of $3.0 million, then some Minnesota estate taxes are due. Note that tax will be due even if the total value of the real property or business assets in Minnesota is below the Minnesota estate tax threshold of $3.0 million.
The method for calculating the estate tax for a non-resident is as follows:
1. Calculate the total estate tax, using the Minnesota estate tax calculators, assuming that the resident was, in fact, a Minnesota resident. The Minnesota estate tax calculator can be found here: https://www.revenue.state.mn.us/estate-tax-calculators
2. Calculate a fraction, the numerator of which is the total value of real property or business assets located in Minnesota, and the denominator of which is the decedent’s federal (total) taxable estate.
3. Multiply the first tax amount by the fraction in step 2 to yield the total tax due.
As an example, consider the case of Arnold Brainerd. While Mr. Brainerd became a Florida resident many years ago, he still owned a Minnesota business interest at the time of his death. When he died in 2021, Arnold owned total assets of $10.0 million, with the Minnesota business interest valued at $1.0 million. Arnold’s estate would calculate a Minnesota estate tax liability as follows:
1. The total Minnesota estate tax on a $10.0M estate, as if Mr. Brainerd were a Minnesota resident, would be $910,000.
2. The percentage of Arnold’s total estate located in Minnesota is 10% ($1.0 million business asset divided by $10.0 million total assets).
3. The resulting Minnesota estate tax is $91,00 (10% times $910,000).
Note that even though Mr. Brainerd died with Minnesota assets of less than the Minnesota exemption amount of $3.0 million, an estate tax is still owed.
Please contact me with questions, or to obtain our assistance in calculating projected Minnesota estate tax liabilities under various scenarios.
