Farm and ranch families can use the federal gift tax laws to avoid the Oregon estate tax on farms at death.

As many folks are aware, anyone (including a non-resident) who owns real estate in Oregon that exceeds $1 million in value is subject to the Oregon estate tax at death.  These days, most functioning farms and ranches are much more valuable than $1 million due to the rising value of land in Oregon.  Without proper planning, unanticipated estate taxes for some families could be so substantial as to force the sale of their farm.

Over the holiday weekend, the president signed the One Big Beautiful Bill Act (OBBBA). Among other things, the OBBBA creates a federal estate and gift tax exemption of $15 million per person. This means that with some tax planning, a married couple can transfer a $30 million estate during life or upon death without paying a federal estate tax. While the new law does not eliminate the Oregon estate tax that taxes any estate exceeding $1 million at death, OBBBA does provide new opportunities for reducing or removing the effects of the Oregon estate tax through lifetime gifting or other strategies to keep the farm in the family.   Because Oregon has no gift tax, many farm and ranch families in Oregon are using the federal lifetime gift exemption (now $13.99 million and rising to $15 million in 2026) to transfer the farm to the next generation during life and avoid Oregon estate taxes.

Before transferring real estate, it is important to analyze whether gifting the farm during life makes sense for you and your future generations. Your estate tax planning lawyer and your CPA can work with you to lay out the pros and cons of such a gift and help you determine the best way to transfer your farm, as well as the steps and timing for the transfer.

There are several considerations before gifting the farm or determining that the farm should instead be inherited at death. A few of these are:

• First, while the federal estate and gift exemption is “permanent,” remember that it is only “permanent” until a simple majority of the legislature changes it again. This means that it is likely permanent for three years, but all bets are off after that.
• Who should receive the farm? Is it a child? Is it a trust for the benefit of a child and future descendants? Is it your spouse in a protected trust?
• The transfer is an irrevocable gift. If you have a falling out with the child or other gift recipients, they still own the farm.
• Are you ready to make such a gift? Giving up legal control of the farm can change family dynamics. Can you make a partial gift and ensure you maintain control of the farm? Have you considered gifting in trusts rather than outright to provide more control and avoid taxes for future generations?
• Will transferring your farm affect your future income? Do you have sufficient income for the rest of your life once this farm has been moved out of your estate?
• Are you comfortable with the child or family member(s) you are gifting to having carryover income tax basis on the farm? This means that if they sell the farm, they pay capital gains on the difference between their income tax basis (what you inherited or bought it for) and the sale price. At current tax rates, the capital gains tax due could be upwards of 30% of the appreciation, in comparison to the maximum 16% for Oregon estate taxes. In other words, if the plan is to sell the farm, gifting may not be as attractive as inheriting from a tax standpoint.
• Does your farm fit into Oregon’s estate tax credit or exemption for family farms if it is inherited by a family member upon your death, rather than received by them as a gift during life? If your estate qualifies for the Oregon Natural Resource Credit or the Oregon estate tax exemption for farms, the farm may receive a step-up in basis upon your passing, making it a potentially better way to inherit the farm.
• If your farm fits into the Oregon farm exemption or credit, is it possible that it may not qualify years down the road when the inheritance is likely to occur? Sometimes the family member who is meant to farm for five more years after the farm owners pass away cannot do so due to health reasons or their retirement.
• Does your will and trust accurately reflect your wishes regarding the farm or ranch? Many times, parents tell their children what is supposed to happen, but the legal documents do not match the plan.

Interestingly, tax planning often is just a small part of working with families to ensure that their family farms and ranches survive into the next generation. Many of the considerations for succession planning are actually not tax related. It can involve planning for sufficient income for both the parents and the children as the work transitions. It can consist of discussing the impact of the farm succession on non-farm family members and options to avoid hurt feelings.  The importance of communication with your family early and often regarding the farm transition plan cannot be overstated.

These are only a few of the considerations when planning your farm or ranch succession. Each family has unique goals and circumstances, and should develop a comprehensive plan with their farm succession attorney and CPA that will work for their family.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice with regard to your situation, you should contact an attorney.