Why Estate Planning is Critical for Nebraska Farmers and Ranchers
Jun 15
6 min read
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Updated June 16, 2025
For agricultural families, estate planning is more than managing assets—it's preserving a legacy often passed down through generations. However, without proper estate planning, the future of your farm could be put at risk due to legal, financial, and tax complications. Whether it’s avoiding unnecessary taxes, ensuring a smooth transition, or protecting the land itself, estate planning is crucial for Nebraska’s agricultural families.
Here are some reasons estate planning is so crucial for Nebraska farmers and ranchers:
1. Preserving Multi-Generational Farms
In Nebraska, family farms are more than just businesses—they represent years of hard work and tradition, often a multi-generational endeavor. Estate planning helps ensure the farm continues operating and remains in the family after you’re gone. Succession planning is critical for ensuring the smooth transfer of management responsibilities, maintaining business continuity, and providing clear roles for each family member involved in the operation. A well-structured succession plan sets out the timing and method of transfer, prepares successors for management responsibilities, and helps avoid disputes that could threaten the farm’s future.
Key considerations include:
Who will run the farm: Whether it’s one child or multiple heirs, an estate plan allows you to designate who will take over the farm’s day-to-day operations.
How the land will be divided: By specifying how assets will be distributed, you can prevent disputes and ensure that heirs who want to farm can continue to do so while others may receive different assets.
Keeping the farm intact: Without an estate plan, dividing the estate could force the sale of farmland to settle debts or taxes. Proper planning ensures that your family’s farm stays whole.
2. Navigating Nebraska’s Inheritance Tax
While Nebraska does not impose an estate tax, it is one of six states with an inheritance tax. Unlike many states, Nebraska levies this tax based on the relationship between the deceased and the heirs. The tax rate and exemption amount vary depending on whether the heir is an immediate family member, a relative, or an unrelated person.
As of 2024, Nebraska inheritance tax rates are:
1% for immediate family members (children, grandchildren, parents) for inheritances above $40,000.
13% for more distant relatives (nieces, nephews, aunts, uncles) for inheritances above $15,000.
18% for unrelated heirs for inheritances above $10,000.
Estate planning strategies, such as gifting assets during your lifetime or using trusts, can help reduce or avoid inheritance tax burdens for your heirs. This is especially important when passing down farmland, as the tax can place a significant financial burden on the next generation.
3. Minimizing Estate Taxes
In addition to Nebraska’s inheritance tax, you may also be concerned about federal estate taxes. The current federal estate tax exemption is $13.61 million per individual (as of 2024), which many Nebraska farmers’ estates exceed due to the high value of land, equipment, and other assets. Once that exemption is exceeded, the tax starts at 18% and quickly ramps up to 40%. Without careful planning, your heirs may face a steep estate tax bill, potentially forcing them to sell parts of the farm to cover the costs.
Fortunately, there are several strategies to help minimize estate taxes:
Special Use Valuation (Section 2032A): This allows your heirs to value your farmland based on its agricultural use rather than its market value, significantly reducing the taxable estate.
Gifting: You can reduce the taxable value of your estate by gifting portions of the farm or other assets to heirs during your lifetime.
Irrevocable Trusts: Establishing trusts can help remove assets from your taxable estate, ensuring that your farm is passed down without large tax liabilities.
4. Avoiding Probate
In Nebraska, probate can be a time-consuming and costly process. Probate means to “prove” a will and is a court process that publicizes all information. The average price for probate in Nebraska is around $15,000, with complexity increasing costs. If your estate goes through probate, it could also delay important decisions about farming operations, such as planting and harvesting, and access to critical resources like farm equipment and accounts.
Estate planning tools such as revocable trusts, transfer-on-death deeds, and proper beneficiary designations can help bypass probate, ensuring a smoother, faster transfer of assets. Probate avoidance also keeps the details of the estate private, providing additional protection for family affairs.
5. Preventing Family Disputes
Estate planning is also about preserving family relationships. Family disagreements over the farm's future can threaten to tear apart both relationships and the operation itself. Without a clear plan, misunderstandings or conflicts among heirs can arise, especially when some heirs are actively involved in the farm operation while others are not. In Nebraska, where family farming is often a deeply personal legacy, it’s crucial to avoid disputes over who gets what.
By creating a transparent plan that outlines inheritance intentions, family members can approach succession and asset distribution with a shared understanding, reducing potential conflicts and ensuring family unity.
A well-crafted estate plan allows you to:
Clearly define roles and responsibilities: You can specify which family members will manage the farm and which will receive other assets, reducing the risk of disputes.
Ensure fair asset distribution: Whether one child continues the farming tradition or the farm is sold, a plan ensures fairness while protecting the operation’s future.
6. Providing Financial Security for Heirs
Nebraska farmers often find that their wealth is tied to assets like land, livestock, and equipment rather than cash. Dividing land and other farm assets among multiple heirs can be challenging, particularly if some family members are active in the farm operation and others are not. This can create financial challenges for heirs when it comes time to pay taxes or cover personal expenses. Without a plan, dividing these assets fairly while keeping the farm operational can become contentious. An estate plan can address this by outlining how assets are allocated through direct ownership, leasing, or other arrangements that provide fair compensation to each heir without jeopardizing the farm’s future.
Estate planning solutions like life insurance policies can provide your heirs with the liquidity they need to cover taxes, debts, or other expenses, without selling parts of the farm. Additionally, setting up trusts can help distribute assets over time, ensuring long-term financial security for your heirs while keeping the farm intact.
7. Planning for Incapacity
In addition to planning for what happens after you pass away, planning for the possibility of incapacity is essential. Nebraska farmers know that illness or injury can strike at any time, putting the entire operation at risk if there’s no plan.
With a durable power of attorney and healthcare directive, you can appoint someone to manage your farm and make healthcare or financial decisions on your behalf if you cannot do so. This ensures that your farm can continue to operate without interruption and that your wishes are followed in any healthcare decisions.
8. Planning for Long-Term Care
As farm owners age, planning for long-term medical care becomes crucial. Without careful planning, these costs can deplete farm assets, leaving heirs with a diminished inheritance. Options like long-term care insurance and Medicaid planning can protect assets from being spent on healthcare, ensuring that the farm remains intact for the next generation. Early planning is essential, as Medicaid has strict asset transfer rules with a look-back period that can impact eligibility.
Conclusion: Protecting Nebraska Farms for Future Generations
For Nebraska farmers and ranchers, estate planning is not just about passing down property—it’s about protecting a way of life. Without a proper plan, your family could face hefty taxes, legal disputes, and disruptions threatening the farm's future.
Estate planning is complex, but essential to securing your family’s future and your farm’s continuity. At Midwest Ag Law, we understand Nebraska’s agricultural families' unique needs and are here to help you navigate the complexities of agricultural estate planning through a tailored plan. Contact us to begin developing a strategy that aligns with your goals, preserves your legacy, and secures your family’s future.
Disclaimer: The information provided in this blog is for general informational purposes only and is not intended to be legal advice. Reading this blog does not establish an attorney-client relationship between you and Midwest Ag Law. You should not act upon any information in this blog without seeking professional legal counsel. Laws may change, and each situation is unique; therefore, consult an attorney for advice regarding your specific circumstances. Midwest Ag Law expressly disclaims any liability concerning actions taken or not taken based on the content of this blog.
