With offices in Oklahoma City, Tulsa and Overland Park, Kansas, there are a lot of farmers and ranchers in our general service areas.
In many cases, large tracts of ranch and farm land have been in families for many generations. The land was purchased when it was inexpensive by today’s standards, but at the present time the land is very valuable.
These folks can face estate tax exposure and we will provide some of the details here.
Federal Estate Tax
The federal estate tax can have a severe impact because it carries a 40 percent maximum rate. When you are land rich but not cash rich, this can present a problem.
Fortunately, there is an estate tax credit or exclusion that allows you to transfer a certain amount tax-free. At the time of this writing, the exclusion is $11.58 million. There are annual adjustments to account for inflation, so the figure will be a bit higher next year. Unfortunately, this exclusion is slated to be reduced significantly in January 2026.
The estate tax applies to all transfers to anyone other than your spouse. As long as you are married to an American citizen, you can transfer unlimited property to your spouse in a tax-free manner.
The estate tax exclusion is portable between spouses. Surviving spouses have their own exclusions and, if not used at the time of the first spouse’s death, these spouses are able to use the exclusions allotted to their deceased spouses.
You cannot give large gifts to your loved ones while you are living to avoid the tax because there is a gift tax. It is unified with the estate tax, so the exclusion is a “unified exclusion” that applies to large gifts made during your lifetime and to your remaining estate after you are gone. The total of both lifetime gifts and transfers at death is capped at $11.58 million.
State Estate and Inheritance Taxes
There are some states that have state estate taxes, as well, but Oklahoma, Kansas, and Missouri do not. If you own valuable property in a state that has an estate tax, its laws would apply to you, regardless of where you live.
The exclusions in states having estate taxes are typically much lower than the federal exclusion, so you might escape federal tax and still owe state tax. This is something to keep in mind if you own property out of state.
An inheritance tax is different than an estate tax. This tax is imposed on the distributions made to multiple different inheritors from the same estate.
There is no federal inheritance tax and only six states have them. The states that we service do not have inheritance taxes, but you could be exposed if you inherit property in a state with an inheritance tax.
Schedule a Consultation Right Now!
If you are a farmer or rancher, you have your own unique set of estate planning concerns. Estate tax efficient strategies can be implemented if this is a concern. Even if it isn’t, you should have your own effective estate plan.
Personalized attention is key and this is what you receive when you choose our firm. We can put you at ease, gain an understanding of your situation, and make the appropriate recommendations.
If you decide to go forward, we can develop a custom crafted plan that preserves your legacy for the benefit of your family.
You can schedule a consultation appointment at our office in Overland Park, Kansas by calling 913-385-9400, or at our Oklahoma City or Tulsa offices by calling 405-843-6100. If you would rather send us a message, fill out our contact form and we will get back in touch promptly.