One wonderful thing about the first session of the 113th Congress was its efforts to enact a taxing scheme allowing an exemption from estate taxes for those with less than $5 million (indexed to inflation), and making permanent the concept of portability. These codified changes taken together mean that married couples with a combined net worth of under $10,000,000 will not have to pay Federal estate taxes.
In Minnesota, however, the exemption is only on the first $1,200,000 per person and there is no portability, which means estate taxes concern many more Minnesota residents. Most clients often think that reaching or surpassing the exemption is not likely, but when you start to consider the future and your changing wealth over a lifetime — including inherited wealth — and factor in increases in the valuation of assets like real estate (cabins, farm land), etc., you can quickly arrive at the $1,000,000 mark. Many working landowners find themselves in an estate tax conundrum when some of their assets are illiquid but the valuation of the family businesses, farm, or cabin leaves them with an estate of more than $1,200,000. Planning becomes a necessity in such cases, unless the plan for paying estate taxes is to sell the business, farm or family cabin.