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Changes may be on horizon for Minnesota and federal estate taxes

Death and taxes. As the saying goes, they are the only two things that are certain in life. That certainly applied to the late owner of the Minnesota Twins, although the taxes turned out to be a lot less than the IRS wanted.

Carl Pohlad died in 2009 at the age of 93. The biggest point of contention in the estate tax dispute was the asset valuation of Pohlad’s ownership interest in the Twins. According to his estate, the value for tax purposes was $24 million. The IRS disagreed, to the tune of about $269 million!

Pohlad had three sons and, through wealth transfer techniques, they controlled 90 percent of the voting shares of the Twins’ ownership at the time of his death.  Those techniques reduced the value that an unrelated buyer would have to pay for the assets.

This type of valuation discount is currently under the estate planning microscope. The Treasury Department, which governs tax laws, has reportedly proposed laws that would limit the types of discounts used in the Pohlad estate and, if the regulations become law, they will be effective immediately. With such a quick change on the horizon, it is a good time to schedule a consultation with an estate planning attorney to figure out how these changes may affect your existing plan, or how to create a plan that will still work well under the new laws.

The federal taxes were only one part of the debt owed by the late owner’s estate. Minnesota is one of 19 states that still has an estate or inheritance tax on top of the federal requirements. The state House even tried to increase the exemption to those taxes this year but it didn’t make it into the final budget.

As the Pohlad battle with the IRS illustrates, the laws that apply to estate taxes can be complex and the estate and the government can be hundreds of millions apart in terms of valuation. While the average estate may not have hundreds of millions at stake, a percentage of savings in a much smaller estate may be even more important and can be protected through certain techniques including beneficiary designations. With changes on the tale for the near future, the advice of a Minnesota estate planning attorney may be crucial to your savings.

 

Source: Forbes, “Estate Of Late Minnesota Twins Owner Carl Pohlad Settles With IRS,” Ashlea Ebeling, Aug. 20, 2015

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