18 NEBRASKA CATTLEMAN December 2025 PRODUCTION Stewarding Agricultural Resources in 2026 and Beyond Agricultural professionals routinely face uncertainty in their day-to-day professional lives. Markets are unpredictable, margins can be tight and weather events challenging. At the start of 2025, the federal estate and gift tax exemption rules also posed uncertainty for stewards of agricultural resources and the planners who seek to advise them on these issues. With the passage of the One Big Beautiful Bill Act (“the Act”), signed into law on July 4, 2025, producers and planners have certainty (at least for now) about the tax-related rules that will govern the transfer of their assets during their lifetimes or at death. The Pre-Act Rules Planners advising agricultural professionals about business and generational transition issues have to consider many implications of lifetime gifts or at-death bequests. In building a transition plan, potential exposure to the federal estate and gift tax is a major consideration. When the federal estate and gift tax is triggered, the top tax rate is 40 percent, which can be a significant tax obligation depending on the amount of tax calculated and the available liquidity to pay the tax obligation. At the beginning of 2025, the federal estate and gift tax rules provided that every individual could give unlimited amounts to spouses or charities through lifetime gifts or at death. Each individual also could gift up to $19,000 per recipient in 2025 as annual exclusion gifting, which means any gift given to a recipient at or below $19,000 in value did not have to be reported on a federal gift tax return and did not decrease an individual’s unified estate and gift tax exemption. The unified estate and gift tax exemption is the total of all gifts given during lifetime above the annual exclusion amount plus the amount a decedent could give at death to beneficiaries other than a spouse or charities without triggering the federal estate tax. In January of 2025, the exemption amount was $13.99 million per individual. Any amount given above the exemption amount would trigger estate or gift tax obligations. The uncertainties surrounding the federal estate and gift tax exemption were the result of the federal statute that set these exemption amounts, which was originally enacted during President Trump’s first term in office and had a 10year term. At the end of the 10-year term (Dec. 31, 2025), the statute stated the federal estate tax exemption would decrease to approximately $7 million per individual on Jan. 1, 2026, unless other legislation was enacted to address the exemption amounts. This looming reduction in the federal estate and gift tax exemption amount triggered significant concerns among many individuals, including farmers and ranchers. The big concern for the ag sector relates to the practical reality that ag producers often have asset-strong and liquidity-light balance sheets. If the death of an owner triggers a federal estate tax obligation, the resulting tax liability can cause strain on the operation’s available liquidity or can require the sale of operation-critical assets to pay the tax obligation. The practical impact of either outcome for operations already experiencing the realities of tight margins, catastrophic weather events and similar variables can be material to the operation’s health and longevity. What the Act Accomplishes The Act’s impact is to remove (at least for now) uncertainty about the federal estate and gift tax exemptions by implementing a “permanent” increase to the exemption amounts. Starting Jan. 1, 2026, each individual will have a $15 million exemption from federal estate and gift taxes. This base $15 million exemption number will increase with annual inflation adjustments each year. The Act also purports to make this change permanent. This only means there is no expiration date for the Act’s provisions. Instead, the Act will remain in effect unless or until it is replaced by other federal legislation. The Act’s provisions also leave the step-up in basis rules unchanged. Recipients of assets through death-related triggers will continue to receive those assets with a basis in value equal to the asset’s fair market value as of the decedent’s death. Gifts given during lifetime will retain the donor’s original basis. Additionally, the portability election rules that were in place under the pre-Act statute remain in effect as well. These rules allow surviving spouses under certain circumstances to elect to receive a deceased spouse’s unused federal estate and gift
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