Frequently Asked Questions About Minnesota's Farm Estate Tax Deduction

Is the Minnesota family farm deduction really $2 million?

For decedents dying after December 31, 2022, Minnesota Revenue states that the qualified small business and farm property deduction cannot exceed $2 million.

The deduction is not automatic, and the amount actually available depends on the qualifying property and the estate's circumstances.

Does every Minnesota farmer automatically get an extra $2 million estate tax exemption?

No.

The farm property must satisfy Minnesota's statutory requirements, pass to a qualified heir, and satisfy the applicable post-death requirements.

Does my child have to personally farm the land?

Not necessarily.

Minnesota's qualified farm property requirements do not impose the same material-participation requirement that applies to qualified small business property. The farm property must instead satisfy the applicable agricultural-property requirements, including maintaining Class 2a classification during the three-year post-death period.

Can my children sell inherited qualifying farmland to each other?

Minnesota's recapture statute contains an exception for a disposition to a qualifying family member. Whether a particular transaction satisfies the statute should be reviewed before the transfer is completed.

What if my farmland is owned by an LLC?

Farmland owned through an entity may still qualify, but the ownership must satisfy the deduction requirements, and an entity subject to Minnesota's Corporate Farm Law must be in compliance with that law.

When should I start planning for the farm deduction?

Before it is needed.

Several requirements depend on circumstances existing before death, including the property's classification and the three-year ownership period. Reviewing those issues in advance provides an opportunity to identify problems while something may still be done about them.

Take the Next Step

If you're ready to start being proactive about your estate plan and want guidance tailored to your family, assets, and goals, contact Wagner Oehler, Ltd. to get started.

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Check out Jason Wagner’s video on the Ultimate Guide to Minnesota’s $2 Million Farm Farm Land Deduction: https://youtu.be/8VXYGOWwG6E.

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