ESTATE TAXES COULD RISE; PLAN NOW!

Current estate tax exclusions set to sunset at the end of 2025.

- Dan Looker

Next year could be the last for generous exclusions from estate taxes. The Tax Cuts and Jobs Act of 2017, which deals with estate taxes, runs through the end of 2025. 

If Congress doesn’t extend the law, exclusions or exemptions revert to the 2017 level. Indexed for inflation, that’s about $7 million, roughly half this year’s exclusion of $13.61 million per individual, or a combined $27.22 million for a married couple. 

Last year, national agricultural tax authority Kristine Tidgren of Iowa State University (ISU) alerted farmers and their advisers to this potential risk.

“If they have assets of $7 million and above, they really need to start talking with a trusted tax adviser to start making plans but not pull the trigger,” she said at the ISU farm tax forum last September.

That’s still good advice. Putting off planning isn’t wise. Let’s look at why you need to plan, and a few approaches to consider with your tax adviser. 

How big is your operation? 

First, is your estate small enough to be caught by a tighter $7 million net?

Farmland may be peaking in high-value states such as Iowa and Illinois. But in Iowa, for example, the average price of best-quality farm ground remains almost $15,000 per acre. It takes about 465 of those to hit $7 million (double that for a married couple). Neighboring Nebraska, where rangeland lowers the statewide average, saw a 5% increase to just over $4,000 an acre by this year. At that value, anything above 1,750 acres triggers an estate tax. 

Of course, farms and ranches aren’t bare ground. Buildings, machinery, livestock, investments, and savings add to your estate’s value.