The $13.61 million lifetime estate and gift tax exemption will be cut in half in 2026. This gives farmers about 18 months to make essential estate decisions.

One option to transfer appreciating land to the next generation is the Grantor Retained Annuity Trust (GRAT). It allows the farmer to place land into the GRAT in exchange for an annual annuity payment. This can take the form of cash or a return of land based on the current fair market value. The GRAT option could allow you to transfer land to the next generation with minimal gift tax consequences.

There is a potential downside risk with a GRAT. If the appreciation and income of the land are less than the required interest rate, then the farmer will not transfer any wealth to the next generation.

Read more on planning for the expiring estate tax exemption here.