Farmers and ranchers should act now on estate tax planning

After Dec. 31, your exemptions will drop by half

If you’ve been holding off on estate planning for your farming or ranching operation, I advise you to make 2025 the year you get it done.

That’s because, on Dec. 31, two generous federal tax exemptions are set to expire:

1. One is the federal estate tax exemption. For 2025, that amount is $13.99 million per person, or $27.98 million for a married couple. If your estate is valued at that amount or less, it won’t incur any federal estate tax if you were to pass away this year. But if your estate exceeds that amount, it will be subject to federal taxes on that portion above the thresholds. The reason you should care? Starting Jan. 1, 2026, the federal tax exemption is expected to drop to approximately $6 million per person, after adjusting for inflation. With the exemption cut by more than half, more estates will be subjected to taxation in 2026. Unless new legislation passes to raise the federal exemption, estates should prepare for higher tax bills. It doesn’t take much thinking to see the advantage of setting up estate planning now, especially when you consider that federal estate tax rates start at 18% and go up to 40%.

2. The annual federal gift-tax exemption also sunsets on Dec. 31, 2025. Under the annual gift tax exemption, you can give away a certain amount of money (or property value) each year, per individual, and those gifts won’t count against your estate tax exemption. For now, you can gift up to $19,000 per person per year. A married couple can give away twice that amount, or $38,000. You can gift money or property to anyone you want. But starting Jan. 1, 2026, that gift tax exclusion decreases to just $9,500 per person. I recommend you use the current gift exemption now, if possible, to give away as much as possible from your estate.

Wills and revocable trusts are necessities

Apart from those sunset exemptions, there are other reasons to make estate planning a priority. Here are two key steps you should take now:

• Everyone should have a will, especially if you have children. If you don’t stipulate what you want to have happen when you pass away, the courts get to decide. With a will, you’ll still have to go through probate, which is time-consuming, costly and public.
• You can avoid probate, however, by creating a revocable trust. Also known as a living trust, this is a legal entity that allows you to maintain control over your assets during your lifetime. You can alter or change it at any time. That provides flexibility in estate planning. A revocable trust allows for easier management and distribution of assets upon your death. It also offers privacy and the ability to avoid probate.

If you have a will and a revocable trust in place, you’re ahead of most people. But the fact is that only 10% of small businesses have a good succession or estate plan in place. And the number is even lower for farmers.

There are many tools out there to help you make the best decisions on estate taxes. For example, you can move legacy assets, such as land, out of a taxable base while still

providing for succession and tax-planning opportunities. I’ve seen that save people millions of dollars in estate taxes.

Estate planning is one of the most important tasks you can do for your family, farm and assets. It provides the mechanics for carrying out your succession wishes. It provides clear direction for how you’ll transfer your business and asset when you’re no longer in charge. It can minimize the tax burden on your beneficiaries. And it’s essential in helping avoid family disputes.

Estate planning requires the assistance of experienced professionals with expertise and objectivity to handle sensitive and challenging situations. Don’t put it off because you don’t know where to start. Reach out to me for help in navigating the estate tax and gift exemptions, so that more of your assets pass on to your loved ones. I‘ve spent much of my career protecting farm and ranch legacies through careful structuring and estate planning. I know how reluctant business owners can be to take that first step.

But remember this: Estate planning is necessary—and it’s doable. There are solutions for every farm or ranch, whether you’re looking to ensure the legacy of your operation, provide for both on-farm and off-farm heirs or avoid estate taxes. If you want to take advantage of the higher estate-tax exemption and the benefits of trusts, act now.

Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Irsik applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].