The Minnesota estate tax exemption is $3,000,000Minn. Stat. § 291.03, § 291.016Verified Sep 15, 2026View source; an estate below it owes no state estate tax. The exemption is a fixed amount set by statuteMinn. Stat. § 291.03, § 291.016Verified Sep 15, 2026View source. A taxable estate faces graduated rates up to 16%Minn. Stat. § 291.03, § 291.016Verified Sep 15, 2026View source.

No. The IRS does not treat inherited money, real estate or personal items as income, so a beneficiary in Minnesota does not report them on a federal return when received. Two exceptions: an inherited retirement account (a 401(k) or a traditional IRA) is taxed as ordinary income as it is withdrawn, and earnings after the date of death are taxable. Inherited property takes a stepped-up basis, its value on the date of death, for any later capital gain.

When someone dies, the cost basis of the property they leave is reset to its fair market value on the date of death26 USC § 1014Verified Sep 15, 2026View source under IRC § 1014. A later sale is taxed on the gain above that stepped-up basis, not above what the original owner paid, so the appreciation of the owner's lifetime is never taxed. The rule is federal and applies in Minnesota as in every state.

Minnesota intestacy law decides. Minnesota follows separate property rulesMinn. Stat. § 524.2-102Verified Sep 10, 2026View source: the surviving spouse's share depends on whether children survive and whose children they are. The estate passes to the closest surviving relatives, in most cases the spouse and children first, then in order: Parents; Descendants of parents; Grandparents and their descendants; Next of kin; The state (escheat)Minn. Stat. § 524.2-102Verified Sep 10, 2026View source.