For most of our careers, the financial focus is pretty straightforward: save diligently, maximize retirement plans, and let investments grow. Estate planning often gets pushed to the side as something we’ll get around to someday when we get old and need it.
Minnesota is one of only a handful of states with its own estate tax, and its exemption is dramatically lower than the federal exemption. If you’ve spent decades building wealth through your 401(k), lump sum pension benefits, equity compensation, real estate, and investment accounts, there’s a good chance your estate could be subject to Minnesota estate tax.
The Federal Estate Tax
Under current law, the federal estate tax exemption is $15 million per person in 2026. Married couples can effectively transfer nearly $30 million through proper use of portability rules before facing federal estate tax. For most 3M employees, this means federal estate tax is unlikely to be an immediate concern.
However, it’s important to remember that today’s elevated federal exemption stems from the One Big Beautiful Bill (OBBB) and can change in the future. While most families won’t face federal estate tax today, staying prepared for potential legislative changes remains important.
Minnesota Estate Tax
Minnesota’s state estate tax system is much less forgiving. The state currently provides a $3 million estate tax exemption per individual, and unlike federal law, Minnesota does not allow portability between spouses. In other words, if one spouse’s exemption isn’t properly used, it may be lost forever. Think about what a $3 million net worth could look like: a family home that has appreciated significantly, a substantial 401(k) balance, RSUs or stock option proceeds, taxable investment accounts, life insurance benefits, or a cabin or vacation property.
Individually, these assets may seem manageable. Combined, they can easily push a family’s net worth above Minnesota’s $3 million threshold. This low threshold drastically increases the range of employees who are often affected from middle management up to C-suite executives.
What Could the Tax Cost?
Minnesota estate tax rates currently range from 13% to 16% on taxable amounts above the exemption. Consider the example of a single 3M employee who passes away with a $5 million estate. After applying Minnesota’s $3 million exemption, $2 million remains taxable. At a 13% rate, the resulting estate tax could be approximately $260,000.
Let’s increase the complexity with an example of a married couple. Consider a $10 million estate for a married couple which leaves all assets to the surviving spouse upon the first spouses’ death. In this scenario, assume that none of the first spouse’s exemption gets used. Upon the surviving spouse’s death, they pass away with a $10 million estate and only a $3 million exemption. At a 13% rate, the resulting estate tax could be approximately $910,000!
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $7.1 million | $0 | 13% | $0 |
| $7.1 million – $8.1 million | $923,000 | 13.6% | $7.1 million |
| $8.1 million – $9.1 million | $1.059 million | 14.4% | $8.1 million |
| $9.1 million – $10.1 million | $1.203 million | 15.2% | $9.1 million |
| $10.1 million and above | $1.355 million | 16% | $10.1 million |
*The taxable estate is the total above the 2026 exemption of $3 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect. Source: https://smartasset.com/estate-planning/minnesota-estate-tax
Strategies to Reduce Minnesota Estate Tax Exposure
The good news is that families have several effective planning tools available. The most successful strategies are often implemented years before they’re needed, allowing assets and planning techniques to work over time.
Strategy #1: Annual Gifting
One of the simplest and most effective strategies is annual gifting. Under current rules, individuals can gift up to the annual exclusion amount each year without reducing their lifetime exemption. Married couples can combine their exclusions to transfer even more. Over time, these gifts can meaningfully reduce the size of a taxable estate while helping children and grandchildren during their lifetimes. It’s not flashy, but few estate-planning strategies are as powerful and impactful for multiple generations as consistent gifting over many years.
Strategy #2: Paying Education and Medical Expenses Directly
Payments made directly to educational institutions for tuition or directly to medical providers for healthcare expenses generally are not treated as taxable gifts. For grandparents helping fund college education or assisting family members with medical costs, this may be an effective way to transfer wealth outside the estate while preserving annual gifting opportunities.
Strategy #3: Charitable Giving
Charitable giving can simultaneously reduce estate taxes and support causes that matter to you. For many retirees and executives, retirement accounts such as IRAs and 401(k)s are often excellent assets to leave to charity. These accounts can create income tax consequences for heirs, while charitable organizations can generally receive them tax-free.
For those interested in giving during their lifetime, donor-advised funds (DAFs) offer a flexible solution. Contributing appreciated assets, such as long-held 3M stock can provide an income tax deduction, avoid capital gains taxes on appreciation, and remove those assets from the taxable estate.
For individuals with large pre-tax IRA or 401(k) balances, charitable giving via the form of Qualified Charitable Distributions (QCDs) can begin at 70.5. QCDs can drastically reduce annual income thereby reducing tax liability, but they are also a great estate management tool.
Strategy #4: Trust-Based Planning
For families whose estates significantly exceed Minnesota’s exemption amount, trusts often become the cornerstone of an effective estate plan. Some of the most common strategies include:
Credit Shelter Trusts (Bypass Trusts)
These trusts help married couples fully utilize both Minnesota estate tax exemptions, potentially sheltering up to $6 million from Minnesota estate tax. Refer to my previous example of the $10 million household that leaves all their assets to their surviving spouse upon death. If a Credit Shelter Trust (CST) is utilized properly, upon the first spouse’s passing, $3 million would be funded into a separate trust. The surviving spouse has access to the trust during their remaining years but upon the 2nd spouse’s death the assets are not included in their taxable estate. The proper use of a CST may drastically reduce estate tax liabilities.
Irrevocable Life Insurance Trusts (ILITs)
Many people don’t realize that life insurance death benefits may be included in their taxable estate. An ILIT can help keep those proceeds outside the estate tax calculation.
Spousal Lifetime Access Trusts (SLATs)
SLATs allow one spouse to transfer assets out of the taxable estate while still providing indirect access to the assets through the beneficiary spouse. A similar but slightly different strategy from the Credit Shelter Trust.
For larger estates, these tools may create significant long-term tax savings and, if all are coordinated properly, may have meaningful tax savings.
Where to Start
Estate planning doesn’t have to begin with complex trust structures. It starts with understanding where you stand today. A practical approach might include reviewing your current net worth and estate exposure, ensuring core estate planning documents are up to date, establishing a disciplined gifting strategy, evaluating charitable giving opportunities, reviewing life insurance ownership, and then exploring trust strategies if your estate exceeds exemption thresholds. The common denominator across every successful estate plan is time. The earlier planning begins, the more options become available.
Final Thoughts
Minnesota’s estate tax isn’t just an issue for the ultra-wealthy. With a $3 million exemption and no portability between spouses, many successful 3M employees and executives may find themselves exposed simply because they’ve done what they were supposed to do: work hard, save consistently, and build meaningful wealth over time.
The strategies to address this challenge are well-established and often more straightforward than people expect. The biggest mistake isn’t failing to implement every strategy, it’s waiting too long to start the conversation. The most expensive estate plan is often the one that was never put in place.
For personalized financial guidance tailored to the needs of 3M and Solventum employees, click here to schedule a meeting with a Beacon Pointe advisor.
Important Disclosure: The information contained in these materials is for general informational purposes only. The discussions, outlook, and viewpoints featured are not intended to be investment advice and do not consider specific investment objectives or risk tolerance you may have. Opinions referenced are as of the publication date and may be modified due to changes in the market or economic conditions and may not necessarily come to pass. Beacon Pointe has exercised all reasonable professional care in preparing this information. The information has been obtained from sources we believe to be reliable; however, Beacon Pointe has not independently verified or attested to the accuracy or authenticity of the information. Beacon Pointe Advisors does not offer legal or tax advice. Estate and gift tax laws are subject to change. Please consult with the appropriate tax, legal, or financial professional regarding your circumstances.