Farmers Face Estate Tax Cliff: Act Now or Lose the Family Legacy!

Listen up, farmers! The clock is ticking, and the estate tax cliff is looming. If Congress doesn’t act fast, the cost of inheriting the family farm will skyrocket at the end of the year. American Farm Bureau economists just dropped a bombshell in their latest Market Intel report. BUY NOW! Or rather, PLAN NOW! Because if you don’t, you might lose the farm that’s been in your family for generations.

The numbers are staggering. If the estate tax exemption reverts to its pre-Tax Cuts and Jobs Act level, nearly twice as many farms in every sales class will have to pay estate taxes. The average net worth of farms subject to the estate tax would plummet from $32.5 million to just under $20 million. That means more smaller farms will be impacted, and low sales farms—those with an average loss of more than $5,700 a year—will see the sharpest fall in net worth, dropping from $42.5 million to a mere $19.5 million.

But here’s the kicker: most of the value of a farm is tied up in land and expensive machinery. In fact, more than 80% of an average farm’s assets are in real estate alone. Actual cash on hand is much lower, making payment of such taxes extremely difficult or even impossible.

AFBF President Zippy Duvall hit the nail on the head: “For many people, their farms are not just their businesses, but they are a family tradition passed down from generation to generation. If a family is forced to sell off its farm piece by piece just to pay estate taxes, they run the risk of eventually losing the farm altogether. We urge Congress to make the estate tax exemption permanent, to enable farm families to continue growing the food and fiber America’s families rely on.”



U.S. farms are closing and consolidating at an alarming rate. The latest Census of Agriculture shows more than 140,000 farms went out of business between 2017 and 2022. Another 20,000 farms have been lost in the past two years, according to USDA. This is a crisis, folks! And it’s only going to get worse if Congress doesn’t act.

So, what can you do? PLAN NOW! Take advantage of the current high federal estate tax exemption, which is $13.99 million per person for 2025. This exemption allows farm families to transfer significant assets without incurring estate taxes. But starting in 2026, the exemption is expected to drop to approximately $6 million per person, making it crucial for farm families to act now.

Consider making large gifts between now and December 31, 2025, to take advantage of the current high lifetime exemption. For instance, a farm couple with an estate exceeding $20 million can consider making large gifts to reduce their taxable estate. This can be done through joint or individual gifting strategies. In the case of individual gifting, one spouse can make the full gift, allowing the couple to efficiently leverage the bonus exemption.

Farm families can also consider using tax deferral strategies. The federal government allows heirs to pay farm-related estate tax over time at a very low interest rate. For example, if a farmer passes away with an adjusted gross estate of $20 million and farm assets are $15 million, the estate tax on the farm assets can be deferred. The first $740,000 bears interest at 2%, and the remaining amount bears interest at 45% of the applicable IRS underpayment interest rate. This deferral can be interest only for up to five years, with the first principal payment due five years and nine months after death, and then amortized over the remaining nine years for a maximum 14-year deferral.

Additionally, farm families can use trusts to remove assets from their estate. For example, an irrevocable trust can be set up to own a life insurance policy, with the proceeds going to the beneficiaries of the trust upon the death of the grantor. This removes the life insurance proceeds from the taxable estate. Another option is a Charitable Lead Trust, where the grantor gives money in trust to a charity, removing the property from the estate while receiving proceeds from the trust during their lifetime.

Finally, farm families should keep up to date on tax changes and consider consulting with a tax advisor about gifting strategies and tax planning. For example, in 2025, individuals can give an individual $19,000 annually without having to file a gift tax return with the IRS. For married couples, the gift tax exemption is $38,000. By making gifts from their estate to family members and friends while they are alive, farm families can reduce their estate and potentially avoid estate taxes.

So, farmers, the time to act is now! Don’t let the estate tax cliff catch you off guard. PLAN NOW! And urge your representatives in Congress to make the estate tax exemption permanent. Your family farm depends on it!