For many, farming is more than a business: it’s a tradition. Families often pass farmland from generation to generation as a part of their inheritance.

With the fiscal cliff in January, the estate tax was set to revert to its 2001 limit of $1 million. This meant that all inherited farmland over $1 million would be subject to the estate tax. Congress passed some last-minute provisions to avoid the estate tax reset and benefit farmers.

  • The $1 million tax-free limit was increased to $5 million. This amount will fluctuate with inflation. As such, the limit for 2013 is at $5.25 million.
  • Any taxes over the limit are capped at 40 percent.
  • The tax exemption is now portable. The Kansas City Star explains, “If a husband or wife dies and leaves an estate that is smaller than the $5.25 million exemption, the surviving widow or widower can add the unused amount to her or his own $5.25 million exemption at the second death.”

Read more about the changes in the estate tax here.

Although these new laws benefit farmers, they are more complex and require greater need for estate planning. Currently, over one-half of farmers don’t have a will or estate plan. The process of farm transitioning entails a lot of paperwork and informative talks with the family, but it will facilitate the complicated process of inheritance.