What is estate tax?

Estate tax is a form of taxation imposed on a person’s estate when they pass away, in some cases also known as “death taxes.” In Minnesota, the estate tax is imposed on estates that are valued at over $2.4 million. The tax is calculated by subtracting the amount of the estate’s allowable deductions (such as funeral costs, debts, etc.) from the total value of the estate before it is subject to tax. This amount is then used to determine the applicable tax rate, which is determined by the amount of the estate’s total value. The amount of estate tax imposed is then calculated by multiplying the applicable tax rate by the amount of the estate’s total value. For example, if the total value of the estate is $5 million and the applicable tax rate is 25 percent, then the estate tax imposed would be $1.25 million. The estate tax is paid out of the estate’s assets prior to its distribution, meaning the beneficiaries of the estate receive the remainder of the estate’s assets after the tax has been paid out.

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