FOOD & AGRICULTURE QUARTERLY | JUNE 2026
Several states continue to impose their own estate or inheritance taxes, sometimes with significantly lower exemption thresholds than the federal system. Unlike the federal estate tax, which is largely dependent on the value of one’ s assets, inheritance taxes are often imposed based on who receives the property.
Although certain states provide favorable exemptions for qualifying agricultural property and family farm transfers, those exemptions often contain technical ownership, operational, and succession requirements that should be reviewed carefully during lifetime planning. Farming families that do not qualify for available exemptions, or whose non-farm assets fall outside of those exemptions, may still face significant tax exposure at death.
For farmers whose primary asset is farmland, these taxes can create a significant liquidity problem. Consider a family farm that has been operated for generations. Over time, the value of the land may increase substantially, particularly if nearby development expands or farmland values rise generally. On paper, the family may appear wealthy because the farm itself has appreciated dramatically in value. In reality, however, the farm may generate only enough annual income to sustain operations and support the family.
If taxes and administrative expenses become due shortly after a farmer’ s passing, the family may be forced to sell acreage, equipment, or even portions of the farming operation simply to raise enough cash to satisfy the estate’ s obligations. In some cases, families are forced to sell the very assets they spent decades trying to preserve. within months of death. For farming families whose wealth is tied almost entirely to land and equipment, that can create enormous pressure on the next generation.
Currently, historically high federal estate tax exemption amounts have caused many families to assume that transfer taxes are no longer a concern. As of 2026, each individual may transfer up to $ 15 million free of federal estate and gift tax, which means many farming operations may avoid federal estate tax entirely. However, relying solely on the federal exemption amount can create a false sense of security.
In other words, the farm may produce a strong harvest during life, but without proper storage and reserves, the next generation may struggle to weather the financial obligations that arise at death.
Fortunately, there are several planning techniques available that can help address this issue before it becomes a crisis.
Transferring the family farm to the next generation during your lifetime is one strategy that is often used to reduce future death tax exposure. In many cases, lifetime transfers of farmland may reduce or
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