HERITAGE Act Aims to Eliminate Federal Estate Tax for Family Farms

The federal estate tax — often referred to as the “death tax” — has long been a source of tension in tax policy. While it was originally designed to target only the wealthiest estates, many argue that its real-world impact falls heavily on family farms and small businesses. Rising farmland values have pushed many estates above the federal exemption threshold, even when those families operate with little liquidity. The result? Inheritance that triggers massive tax bills, often forcing families to sell land or equipment just to pay the IRS.

In response, Senator Cindy Hyde-Smith (R-MS) introduced the HERITAGE Act (Helping Every Rancher Invest in Agriculture, Timber, and Generational Estates). The bill seeks to eliminate the federal estate tax entirely for qualifying family-owned farms and agricultural businesses. It also proposes indexing farmland valuation limits to reflect modern land prices and ensures protections are in place to keep the land in agricultural use after it is passed on.

Supporters of the bill see it as a lifeline for family farms, allowing generational wealth and business continuity without tax-induced liquidation. Senator Hyde-Smith emphasized that the bill is designed to protect working farms, not wealthy estates with idle assets. Under her proposal, farms that are inherited by direct descendants and continue to operate in agricultural production would be fully exempt from estate taxation.

For CPAs, estate planners, and rural tax professionals, this legislation is worth watching closely. While the bill is still early in the legislative process, it introduces significant implications for estate structuring, gifting strategies, and intergenerational transfers of wealth. If it becomes law, existing estate plans will need a fresh review — especially for clients with large tracts of farmland, high-value timber, or livestock operations.

The HERITAGE Act now awaits discussion in the Senate Finance Committee. While the proposal is expected to receive pushback over potential revenue losses — estate taxes are estimated to bring in $50 billion annually — there’s growing bipartisan recognition of the unique burden that tax policy can place on family agriculture.

Professionals should stay alert for movement on this bill as Congress enters a broader phase of tax reform discussions. With the House already passing its “Big Beautiful Bill,” and 2025 sunset provisions looming from the 2017 Tax Cuts and Jobs Act, estate tax reform could end up being part of a larger package.

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