Tax Policy and Estate Planning

The Death Tax Is Gone (Permanently): A New Era for Family Farm Succession

The headline says the estate tax is gone. Even if that is how supporters describe the law, a farm succession plan still involves far more than one tax.

What does it mean when the estate tax is called permanent?

Supporters of repealing or sharply limiting the federal estate tax, which they call the death tax, say that families should not have to sell land or equipment to pay a tax bill when a parent dies. The title makes a strong claim, and readers should check how the law actually reads. The IRS estate and gift tax pages and Congress.gov are the official places to confirm what applies today.

Even when federal rules look favorable, a plan built only on today’s law can be undone by the next Congress. Permanent in tax talk usually means no scheduled expiration, not no possible change.

Why a succession plan is bigger than one tax

Most farm transitions that go wrong fail for reasons that have nothing to do with the estate tax. Heirs disagree. One child wants the farm and three do not. A parent works the ground at seventy-eight and never talks about retirement. Equipment titles, land titles and leases sit in different names.

A written plan names who runs the operation, who owns the land, how off-farm heirs are treated, and what happens if someone becomes disabled. Texas A&M AgriLife Extension and Texas AgriLife farm transition resources offer workshops on exactly these conversations in many counties.

Write down the disagreements early. A list of open questions is easier to resolve than a family silence that lasts until a funeral.

• Who manages and who owns?
• How are off-farm heirs treated?
• What happens at disability or divorce?

Basis, gifts and what else still carries tax

Estate tax is one piece. Income tax basis, gift tax filing, property tax, and capital gains on a sale all remain part of the puzzle. How and when land passes can change the basis the next owner uses, which affects the tax on a later sale. This is why preparers ask for an inventory of land, livestock and machinery with purchase years.

Ask your advisor to confirm how Texas treats estates and income, because state rules differ from federal ones, and property appraisals matter either way. The Texas Comptroller publishes property tax information, and ag valuation rules matter if the land is under special appraisal.

The case supporters make, and the counterpoints

Supporters argue that family farms are asset rich and cash poor, so a tax due at death can force a sale to developers or large buyers. They say removing that pressure keeps land in farming and lets the next generation invest instead of liquidate.

Critics respond that few farms were actually large enough to owe estate tax under earlier thresholds, that the revenue loss is real, and that the benefit goes mainly to the largest estates. Both claims can be partly true depending on the year and the farm. The CBO and USDA Economic Research Service publish figures worth checking against whichever side you read.

A practical succession checklist

Start with the conversation. Put the whole family in one room with a neutral facilitator if needed. Then gather documents: deeds, leases, loan notes, insurance, entity papers, and a list of machinery. Bring them to an attorney who handles agricultural estates and a CPA familiar with farm returns.

For the money side, this farm money guide covers basics like balance sheets and cash flow, and this small farm planning guide helps if the next generation wants to start small. Farm.FM also has a gentle take on family farm dynamics, like a farm.FM story on handing down the farm, and the farming stories section and ranch economics pages often touch on succession.

This is general education, not legal or tax advice. Talk to a licensed attorney and tax professional.

• Gather deeds, leases, notes and machinery list
• Hold the family meeting before the legal meeting
• Review documents when laws change

Where to find help locally

The Texas Farm Bureau and your county extension office both host succession events, and USDA programs for beginning farmers can help the successor. Check each program’s current rules before counting on it.

Review the plan every few years or after a birth, death, marriage or big land purchase. A plan on paper that nobody has read in a decade is not a plan.

Sources and further reading

• IRS: federal tax guidance
• Congress.gov: bills and legislative status
• Texas Comptroller: state tax and economic data
• Texas A&M AgriLife Extension: Texas extension service
• Congressional Budget Office: cost estimates for federal programs
• Texas Farm Bureau: state farm organization

Ask locally: Ask a Texas attorney who handles agricultural estates and your county AgriLife Extension agent.