Tax Relief for Qualified Minnesota Businesses and Farms

For those of you out there that are residents of Minnesota and owners of a small business or family farm, there is a relatively new law offering relief from the Minnesota estate tax.

Overview

Currently, in Minnesota, depending on the planning in place and the beneficiaries named, decedent’s estates over $1 million pay the Minnesota estate tax. However, this new estate tax law in Minnesota allows deceased owners of a qualified small business or a qualified family farm to exclude up to $4 million of the value from the Minnesota adjusted taxable estate.  This law is effective for business or farm owners who pass away after June 30, 2011.

Qualifying

A qualified small business is actively engaged in a trade or business and has gross annual revenue that does not exceed $10 million in the tax year ending prior to the date of death.  For a  family farm to be qualified, it would have been claimed as homestead property and the decedent or spouse must have materially participated in the business or farm for at least three years before death.

To obtain the exclusion the small business or farm interest must pass directly to a “qualified family member”.  Recapture rules apply if the family member sells the interest within three years of the transfer to a non qualified family member or outside party.

As always, be sure to contact your local accountant, estate planning attorney or other financial professional for more details.