We've mentioned it before, but it's really important. In Minnesota qualified small business and agricultural homestead property is exempt from estate tax up to a value of $4 million.
If you live in Minnesota, check with your local county assessor's office about the status of your property. If you don't live in Minnesota, ask at the Extension office about homestead estate tax rules in your state.
As we build a plan for legacy transfer and business transition we must consider a variety of issues. In Minnesota one important issue is the Minnesota State Estate Tax that applies to any estate larger than $1.4 million in 2015. With agricultural businesses, it can be easy to exceed this amount.
A recent development in Minnesota law offers a bit of help for small business and famers. In 2011, Minnesota created a new estate tax rule for qualifying small business or family farms to allow for a $4 million Minnesota estate tax exclusion, per individual, in addition to the standard $1.4 million (for tax year 2015) Minnesota estate tax exclusion available to every individual.
Regular readers of this space might remember that we mentioned this homestead tax issue in the past, but it's important enough, and the rules are tricky enough, that it makes sense to revisit your homestead status every year or so. The rules around Minnesota farm homestead classification vary by county so check at your county assessor's office to get the official ruling on you property.
Many farm families assume they qualify. What if they are wrong and only discover it after the death of the property owner? It could be an extremely costly mistake. It's worth another check.
To better understand if your property qualifies for homestead classification, have a look at this reference prepared by the University of Minnesota Extension Service. It does a great job of laying out whether your farm property qualifies as a homestead for the Minnesota estate tax exclusion: Minnesota Homestead Guidelines Info Sheet.
If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.