Probate & Trust Law Section Conference Manual ... - Minnesota CLE

total federal gross estate (calculator line 1): 1,245,000
allowable deductions - administration expenses
plus taxable gifts ($410,000 minus $13,000 for each of 3 children) 371,000
Minnesota adjusted taxable estate (calculator line 7) 1,606,000
Table A calculation (calculator lines 8 - 16) 603,500
257,700
Table B calculation (calculator line 17) 47,440
REDUCTION FOR OUT-OF-STATE ASSETS (M706 lines 2 – 6):
Real estate located in South Dakota 250,000
Federal Total Gross Estate ÷ 1,245,000
Reduction percentage 20.08%
Tentative Minnesota Estate Tax (line 1 of M706) 47,440
Subtraction for Out-Of-State real estate
Minnesota estate tax due (his estate is above the filing requirement) 37,914
Tax cost of inheriting South Dakota real estate 37,914
Appendix – 12.
Example #7 – Out-Of-State farm in LLC: Assume the same facts as example #6
except that prior to his death Jack’s his brother-in-law convinces the family to create an
LLC which will own the South Dakota farm. This is done in an attempt to make the farm
a non-probate asset and avoid the need for probate administration in South Dakota. He
had previously made all of the lifetime gifts discussed above and leaves all of his assets
to his children as discussed in example #6.
Please note that the reduction in Minnesota estate tax only applies to real estate located
outside of Minnesota and to tangible personal property that is normally kept or located
outside of Minnesota. By transferring the South Dakota farm to an LLC, this asset was
converted to “intangible personal property”. Under current Minn. Stat. §291.03, the situs
of Jack’s share of the LLC is now based on Jack’s Minnesota domicile at the time of his
death. Thus, putting the South Dakota farm into the LLC made this an asset with its tax
situs in Minnesota.
¼ of South Dakota farm held by LLC 250,000
home 300,000
bank 5,000
investments 190,000
401(k) 500,000
total federal gross estate (line 1 - above the filing requirement): 1,245,000
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