Does Minnesota Have a Death Tax?

The Short Answer

Minnesota does not have an inheritance tax. It does have an estate tax, which is sometimes called a death tax. Those are two different things, and the distinction matters. If you are trying to figure out whether you owe something or whether an heir of yours will, read on.

Does Minnesota Have an Inheritance Tax?

No. Minnesota does not have an inheritance tax.

But what is an inheritance tax? An inheritance tax is exactly what it sounds like. When an individual inherits money or assets from a recently deceased person, those assets are taxed. The tax is paid by the person receiving the inheritance, not by the estate.

For example, imagine Tina is 85 and her son David is 50 and the beneficiary of her estate. When Tina passes, an inheritance tax, if one existed, would mean David would owe tax on what he receives.

Minnesota does not work that way. David pays nothing to Minnesota on the inheritance itself. Minnesota also does not have a gift tax in the traditional sense, though there is a nuance worth understanding that we cover below.

Inheritance Tax vs. Estate Tax

These two taxes are different and often confused. That is understandable because they are both triggered by death and both involve transferring assets. But they work very differently.

An estate tax is paid by the deceased's estate before assets are distributed to heirs. If Tina's estate owes estate tax, the bill is settled at the estate level. David does not pay the tax; the estate does.

An inheritance tax is paid by the person who receives the assets. If Minnesota had one, David would owe it. It does not, so he would not.

Minnesota has an estate tax but no inheritance tax. If you have heard the term death tax, it is an informal way of referring to the estate tax. It is not a third, separate tax.

What Is Minnesota's Estate Tax?

Minnesota taxes estates above $3 million at rates between 13% and 16%. The exemption has not changed since 2020 and is not indexed for inflation. It is also not portable between spouses, which matters for married couples with combined estates above $3 million.

We have a full guide to Minnesota's estate tax that covers rates, exemptions, planning strategies, and worked examples.

Does Minnesota Have a Death Tax?

Yes, but it is not a separate tax. Death tax is an informal term for the estate tax. When an individual passes with an estate above $3 million in Minnesota, the estate owes Minnesota estate tax before assets are distributed. The heirs do not pay it directly. The estate does.

What This Looks Like in Practice

Scenario 1: Inheriting from a Minnesota resident with a small estate

David is a Minnesota resident whose mother, Tina, passed away with an estate valued at $2 million. Because Tina's estate is below Minnesota's $3 million exemption, no Minnesota estate tax is owed. Because Minnesota has no inheritance tax, David pays nothing on what he receives. The inheritance passes to him clean.

Scenario 2: Inheriting from a state that has an inheritance tax

Now imagine Tina lived in New Jersey instead of Minnesota. New Jersey has an inheritance tax, but who pays it depends on their relationship to the deceased. Spouses and direct descendants, like children and grandchildren, are fully exempt. So David, as Tina's son, still pays nothing. But if Tina left a portion of her estate to a sibling or a friend, that person may owe New Jersey inheritance tax on what they received, even if they live in Minnesota.

Scenario 3: Inheriting a large Minnesota estate

Finally, imagine David inherits $4 million from his mother, Tina, a Minnesota resident. David owes no inheritance tax because Minnesota does not have one. However, Tina's estate was responsible for paying Minnesota estate tax on the portion exceeding the $3 million exemption. That tax was paid at the estate level, and David receives what remains after the estate has settled its obligations.

All to say, David does not write a check to the state because the estate already did.

It is worth noting that certain assets, such as a Traditional IRA or Roth IRA, life insurance, jointly held property, or a T.O.D. designation, may pass directly to the beneficiary on file, thereby avoiding probate or a trust settlement process. The value of these accounts is fully included in the decedent's estate for estate tax purposes, even if the beneficiary has already received the assets.

Issues like this are a good example of why estate planning should be coordinated with tax planning and financial planning to get positive results and reduce the burden on heirs.

Which States Have an Inheritance Tax?

Five states currently impose an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa previously had one but phased it out for deaths occurring after January 1, 2025.

In most of these states, spouses are fully exempt. Children and direct descendants are exempt in some states but not in others. The further removed the heir is from the deceased, such as a sibling, a niece, or a friend, the more likely they are to owe something, and at a higher rate.

Maryland is worth a special mention because it's the only state in the country that has both an estate tax and an inheritance tax. This means that an estate there might owe taxes not only at the estate level but also again when it passes to the heirs, depending on the size of the estate and the relationship of the heirs.

If you are a Minnesota resident expecting to inherit from someone in one of these states, the inheritance tax follows the deceased's residence, not yours. Whether you owe anything depends on your relationship to the deceased and that state's rules.

Frequently Asked Questions

Does Minnesota have a death tax?

Yes, but it is not a separate tax. Death tax is an informal term for the estate tax. Minnesota taxes estates above $3 million at rates between 13% and 16%.

Does Minnesota have an inheritance tax?

No. Minnesota does not tax the recipients of an inheritance. If you inherit money or assets from a Minnesota resident, you do not owe Minnesota tax on what you receive.

Does Minnesota have an estate tax?

Yes. Minnesota's estate tax applies to estates above $3 million. We cover the full details, including rates, exemptions, and planning strategies, in our guide to Minnesota's estate tax.

What is the difference between an estate tax and an inheritance tax?

An estate tax is paid by the estate before assets are distributed to heirs. An inheritance tax is paid by the person who receives the assets. Minnesota has an estate tax. It does not have an inheritance tax.

Does Minnesota have a gift tax?

Not in the traditional sense. Minnesota does not tax lifetime gifts as they are made. However, gifts above the federal annual exclusion made within three years of death may be added back into the taxable estate for Minnesota estate tax purposes. In practice, this functions like a gift tax for anyone gifting heavily late in life.

What states have an inheritance tax?

Five states currently have an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa phased its inheritance tax out for deaths occurring after January 1, 2025. Maryland is the only state with both an estate tax and an inheritance tax.

Where to Go From Here

If you live in Minnesota and your estate is approaching $3 million or more, the estate tax is worth planning around. If you are expecting to inherit from someone in another state, it is worth a quick conversation to understand whether that state's rules apply to you.

Our advisory team works with families in Minnesota and across the country on estate planning, wealth transfer, and retirement decisions. A conversation costs nothing.