With the end of the 2019 Minnesota legislative session, there are many law changes.
The following are some items to take into consideration when making estate and farm succession plans.
Minnesota estate tax
The Minnesota estate tax exemptions did not change. The Minnesota estate tax exclusion amount for decedents dying in 2019 is $2,700,000. For 2020 and beyond, the exclusion amount is $3,000,000.
This means a decedent dying in 2019 can transfer up to $2,700,000 in assets without paying a Minnesota estate tax.
The exclusions for qualified small business property and qualified farm property also remained unchanged. So, if the decedent owns these types of assets and their circumstances meet the qualified requirements, they can elect to have the value of these assets excluded from their estate up to the applicable limits, which are $2,300,000 in 2019 and $2,000,000 thereafter. The total value of the property exempted can be up to $5,000,000.
Some changes were made that may make it easier for farm real estate to qualify for the agricultural homestead classification.
Under the previous law, if a business entity owned farmland and a separate business entity operated the farm, this land would not qualify for agricultural homestead classification.
Under the new law, the farmland owned by a business entity will qualify for the agricultural homestead classification if the shareholder, member or partner of the business entity owning the land who is actively farming the land is also a shareholder, member or partner of the business entity operating the farm. An additional requirement is that over half of the shareholders, members or partners of the business entities are qualified relatives.
Under the previous law, the ownership of land held in separate trusts could not be linked for the purposes of determining agricultural homestead classification. This meant real estate could be disqualified from receiving agricultural homestead classification if some of the property was held in the trust of one spouse and other real estate was held in the trust of the other spouse.
Under the new law, a combination of ownership by the spouses and the spouses’ trusts can be linked together when determining agricultural homestead classification.
This expansion of the qualification for agricultural homestead will make it easier to qualify for the qualified farm property exclusion. This exclusion requires that the property be owned by the decedent for three years prior to the decedent’s death. With this expanded ownership qualification, this three-year ownership will apply to both spouses and their trusts.
Balzarini is an attorney at law with Miller Legal Strategic Planning Centers, P.A. Email him at firstname.lastname@example.org.