What is the estate tax and what assets get taxed?
Minneapolis, MN estate planning attorney Cameron R. Kelly talks about the estate tax and what exactly gets taxed in it.
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The estate tax is in the internal revenue code it is the federal government taxes the transfer of your money from you to your beneficiaries and so a lot of times that’s your kids. That transfer gets taxed and fortunately the federal tax exemption amount has gone up over time and it’s now almost five and a half million dollars. And so if I die and have less than five and a half million dollars, which is most of the people that attorneys deal with then in that case there is no federal tax on transferring my to your beneficiaries.
The issue still comes up though because a lot of states have very similar taxes in place. And so Minnesota is an example of that where at around two million dollars if you have more than that amount is going to be taxed when you pass it to your beneficiaries and that tax can add up pretty quickly. I’ve had a couple of recent three million dollar estates that get taxed at around $120,000.00 and so it’s significant amount of money and it’s something that usually can be avoided through planning.