Do my tax exemptions go to my spouse when I die?

One of the many reasons to create a Revocable Living Trust is to preserve the value of Minnesota estate tax exemptions.

In 2018, the Federal exemption is $10.9M for a single person or $11.25M for a married couple. If one person dies, his or her exemption is “portable” meaning that it passes to the surviving individual. When that person dies the entire $11.25M can be used on the Federal estate tax return to minimize or eliminate Federal death taxes.

The Minnesota exemption for 2018 is $2.4M per person. But unlike the Federal exemption, this exemption is not portable. It is lost when one person dies. When the second person dies only $2.4M can be used as an exemption on the Minnesota estate tax return. In Minnesota, married couples do not have the same portability as under the Federal law. So when one person dies that person’s $2.4M exemption dies with them.

This personal exemption can be saved by placing assets in a Revocable Living Trust so that when Minnesota estate taxes are computed, the personal exemption becomes portable and both spouses can use up to $4.8M for exemptions in 2018.

The Minnesota Qualified farm exemption allows each spouse to take $5M exemption, assuming the rules are complied with.

UPDATE: The 2017 Minnesota State Legislature raised the exemption rates. Read more on our News page.