The federal estate tax now reaches very few families. The One Big Beautiful Bill Act, signed in July 2025, set the federal exemption at $15 million per person for 2026, indexed for inflation going forward. A married couple can shelter about $30 million. Minnesota did not follow. The Minnesota estate tax exemption remains $3 million per person in 2026, with rates from 13% to 16% on the amount above it. Bills to raise or repeal the Minnesota tax have been introduced, but none has passed.
The $3 million threshold catches more families than people expect. A paid-off home, retirement accounts, life insurance proceeds, and a farm or cabin can cross it quickly. Life insurance counts toward the estate if the decedent owned the policy. Retirement accounts count at full value, even though income tax is still owed on withdrawals. Nonresidents who own Minnesota real estate, such as a lake cabin, can also owe Minnesota estate tax on that property.
Two Minnesota rules make planning especially important for married couples. First, Minnesota does not recognize federal “portability.” If the first spouse leaves everything outright to the survivor, the first spouse’s $3 million Minnesota exemption is lost. A properly drafted credit shelter (bypass) trust preserves it, which can save a couple several hundred thousand dollars in Minnesota tax. Second, Minnesota has no gift tax, but taxable gifts made within three years of death are added back to the Minnesota taxable estate. Deathbed gifting does not work.
Many Minnesota estate plans were written when the federal exemption was far lower and the federal tax was the main concern. Those plans may use formula clauses that now push assets into the wrong trust, or no longer make sense at all. Others were written for small estates that have since grown. Year-end is a natural checkpoint: review asset values, beneficiary designations, how the cabin or farm is titled, and whether your trust still divides assets the way you intend.
The federal headline is good news, but Minnesota residents still plan around a $3 million line. Messick Law helps Minnesota families review and update estate plans with both taxes in mind.
This article is general information, not legal or tax advice. Reading it does not create an attorney-client relationship.