The week of June 10, Farm Journal is celebrating the next generation of American agriculture. Our goal is to encourage you to plan for the future and cultivate multigenerational success through the transfer of skills and knowledge. Think tomorrow, act today to align your asset, resource and financial legacy.
By Heather Gieseke
After witnessing a beloved and once-thriving family farm fail, I reached out to my colleague Kevin Bearley to make sense of what went wrong. As an estate and succession planning adviser for Pinion, Bearley often sees families make similar transition mistakes. For example:
- Dad doesn’t want to deal with the issue of his own mortality. His father left it all to him to figure it out on his own, and it worked out.
- The family avoids conversations about whether or when dad wants to retire.
- Siblings or children don’t get along well, so parents delay retirement or succession planning because they fear it will increase conflict.
- Thinking fair and equal means dividing everything evenly among on- and off-farm heirs.
But silence, or having no plan at all, is far worse than having even a bad plan in place.
Act Before Estate-Tax Exemption Drops
On top of that, there’s a compelling reason to address retirement and inheritance issues now. The estate-tax exemption will expire at the end of 2025, dropping from $13.61 million per person to $5 million (adjusted for inflation). The smaller exemption comes at a time when inflation and land values have ballooned. That’s led to growing anxiety about increased assets and estate-tax rates.
| Current 2024 Law | Proposed Change in 2026 | |
|---|---|---|
| Exemption (individual) | $13.61 million | $5 million* |
| Exemption (married) | $27.22 million | $10 million* |
| Estate and Gift Tax Rate | 40% | 40% |
*Adjusted for inflation
“It’s imperative for the senior generation to have a plan because, if not, you’ll end up in a court proceeding,” says Bearley who’s an attorney and a CPA. “Judges don’t understand agriculture. They’ll want you to sell all assets, which could require selling land, and then you’ll have to pay your tax bill and attorney before splitting what’s left — and there’s rarely anything left.”
He recommends three techniques to protect your assets while the $13.61 million exemption is still in place:
- Gift your assets. A husband or wife could use one spouse’s exemption to gift land and other assets while keeping the other spouse’s current $13.61 million tax exclusion.
- Move your assets to the next generation. Transferring your assets to your heirs takes special expertise, but it can be a smart way to protect your estate from burdensome taxes.
- Freeze your assets’ value. With the steady rise in land values, your farm’s worth could double in the next 10 years. If you take steps to freeze its value now, you won’t face a higher property valuation in the future, when tax-exemption rates drop to $5 million per person.
Bearley urges farm families to start today to devise a strategy to achieve your retirement goals or to pass on your estate to the next generation.
You’ll need to work with an attorney, a CPA and a family business consultant — trained advisers who understand farming. It takes time to find the right professionals, set goals, explore your options, map out a specific plan and communicate to all involved. Getting the right result for your family will help avoid strife, keep more of your wealth where you want it and sustain the farm for future generations.
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