Farm estate planning: Don’t fall off the estate tax exemption cliff

For farmers and ranchers, the thought of having to pay estate tax may never cross your mind.

With the majority of value in your land, cash flows can be tight, but your overall estate value may be higher than you think. Taxable estates include more than just cash and investments. Physical assets such as homes, businesses and land also impact value — a critical consideration in places like Montana, where land prices have risen significantly over the last few years.

With the pending January 1, 2026, estate tax exemption cliff, ranch or farm estate planning should be top of mind, even for younger individuals and smaller estates.

The estate tax exemption cliff

In 2024 and 2025, individuals will have around $14 million of estate tax exemption. For a married couple that’s $28 million.

However, on January 1, 2026, that exemption is set to decrease to about $7 million per person with a tax rate of 40%. 

To understand the impact, consider an individual with a $20 million estate. If they did not take advantage of the current exemption, their taxable estate would go from around $6 million to $13 million. It could also potentially result in an additional $2.8 million of estate taxes.

The exemption numbers are subject to change with an expected round of new tax laws, but it’s uncertain if changes will impact estate planning for better or worse.

The importance of agricultural estate planning

Should the lower exemption rate stand, it’s critical to start or modify your estate plan.

Planning early can help you maximize the value of your estate and the amount your beneficiaries ultimately receive. But it’s also essential to remember that estate planning is more than managing or gifting assets. It’s a human process that can have a considerable impact on your family, future and legacy.

An effective ranch or farm estate plan can help you: 

• Protect your legacy: Estate planning isn’t just for high-net-worth individuals. The current gift tax exclusions and estate tax exemptions can impact a wide range of estates. For smaller estates, not establishing a plan can still lead to unnecessary financial loss or unexpected taxes.
• Protect your family: An estate plan can help you preserve relationships and help ensure a smooth transition of wealth and responsibilities. It can also help your family avoid the costly, lengthy and time-consuming probate process.
• Protect your future: Many people avoid estate planning because they feel they are too young, but the earlier you establish your plan, the more effective it will be. Getting an early start on building your estate plan’s foundation makes it easier to modify later so that it reflects changes in your life or business.
• Protect your vision and goals: Answering big-picture questions like how you will balance control with efficient wealth transfer can help you plan for how to keep your future aligned with your vision and goals. Your plan can be as simple as establishing protections to help keep your business within the family or establishing a recoverable trust.

Starting your estate plan

The key to a successful plan is not to wait.

Estate plans take time to establish, and as the exemption cliff draws closer, advisors and appraisers are only going to get busier. 

Now is the time to start having critical estate planning conversations. Here are two steps you can take today to begin your estate plan:

Step 1: The first step in addressing your plan is to determine the current estimated fair market value of all of the assets you own. If your farm, ranch land or operation is owned by an entity, then you need to determine the fair market value of that entity. You don’t need to get an appraisal of the land or equipment just yet; a rough estimate of the value can act as a starting point.

Step 2: Once you know those numbers then it’s time to consult an expert who specializes in estate planning. The right advisors will work with you to minimize the potential future tax consequences. Items they will likely discuss with you range from gifting and life insurance to entity structure and trusts. Just as each operation is different, so are the estate planning options that will work best for you and your family.

How Wipfli can help

Wipfli offers personalized estate planning designed to fit your vision of the future. Our advisors have experience working with agricultural operations, positioning us to better understand your circumstances and assets. We’re ready to help you establish your estate goals and create a plan to achieve them.

Contact us today to learn more about how we can help you protect your legacy.