For two years, the estate planning world talked about a coming tax cliff. The federal exemption was supposed to drop by roughly half at the end of 2025, and plenty of families rushed into big decisions ahead of it. That cut never arrived. The higher exemption stayed in place and is now permanent, leaving some Iowa business owners with plans built around a deadline that came and went.
So what does reducing estate tax look like now? For most people in West Des Moines, the answer has less to do with the federal threshold and more to do with how assets are titled, when they transfer, and what heirs will owe in other taxes.
Start With the Numbers That Apply to You
In 2026, the federal estate and gift tax exemption sits at $15 million per person, or $30 million for a married couple who handle the paperwork correctly. A 40% rate applies only to value above that line, and fewer than one estate in 500 owes anything.
Iowa adds nothing on top. The state dropped its estate tax in 2005, and its inheritance tax ended for deaths on or after January 1, 2025. If a parent died in 2024 or earlier, the old inheritance rules may still govern that estate.
Why Business Owners Still Pay Attention
Those thresholds sound comfortable until you total up what you own. A closely held company gets valued at death, and the number often runs higher than the owner assumed. Add appreciated farmland, commercial property, retirement accounts and a life insurance policy you own outright, and the math moves fast.
Growth is the part people underestimate. A business worth $6 million today may look very different by the time it reaches your children, which is reason enough to revisit your plan when circumstances change.
Annual Gifts Do Quiet Work
Giving assets away during your lifetime remains one of the simplest ways to shrink a taxable estate. The IRS sets an annual amount you can give any one person without filing a gift tax return, married couples can combine their limits to double it, and the giving can repeat every year with as many recipients as you like. Money you move out now takes its future growth with it, which makes business shares worth transferring early.
Shifting Future Growth Out of Your Estate
Several structures move assets and their appreciation to the next generation while you keep something in return. Trusts play a central role here, since they let you set terms rather than simply handing property over. Families with a business or rental portfolio sometimes explore a private annuity sale. You sell an asset to a family member in exchange for fixed payments for the rest of your life. Because it counts as a sale, the asset and its future growth generally leave your estate without using lifetime gift capacity. The tradeoffs deserve a hard look:
- If you live well past the actuarial estimate, the buyer may pay more than the asset was worth
- The buyer needs steady cash flow to keep up with payments
- Selling can trigger capital gains, depending on the asset and its basis
- Payment schedules rest on interest rate assumptions that may not hold
The Mistake That Costs More Than the Tax
Families sometimes give property away to keep it out of the estate, then create a larger bill elsewhere. When children inherit appreciated property, its tax basis generally resets to the value at your death, erasing decades of capital gains. Gift that same property during your lifetime and your original basis usually goes with it.
That tradeoff shows up constantly with the family home and with farm ground, which is why there are often good reasons to think twice about gifting a house to your kids. Property held in a revocable trust follows its own rules, and how Iowa treats real estate inside a trust affects both the tax picture and whether it lands in probate.
Check the Paperwork Nobody Reads
Careful planning falls apart over small details. Retirement accounts, life insurance and payable-on-death accounts pass by the form on file, and that form overrides whatever your will says. A designation naming an ex-spouse undoes a great deal of work, so confirm that your beneficiary designations still match your plan. Your attorney, CPA and advisor each see one slice of the picture, and they give cleaner guidance working from the same information.
Key Takeaways
- The expected drop never took effect: The federal exemption is $15 million per person in 2026, with a 40% rate applying only above that amount.
- Iowa charges no death tax: The state has no estate tax, and its inheritance tax ended for deaths on or after January 1, 2025.
- Business value grows: A company or farm comfortably under the threshold today may look different in 20 years.
- Annual gifting compounds: Yearly gifts within the IRS exclusion move both the asset and its future appreciation out of your estate.
- Watch the basis tradeoff: Gifting appreciated property during life can cost heirs more in capital gains than it saves in estate tax.
Planning Around the Rules You Actually Face
Reducing estate tax is only part of the conversation for most Iowa families in 2026. The bigger questions involve keeping a business running through a transition, protecting a spouse, and passing property on without an unexpected tax bill. Pearson Bollman Law works with clients in West Des Moines and across our Iowa and Kansas offices to review where a plan stands against current law. If your documents were built around the old sunset date, an attorney can walk you through your options. Request a consultation to learn more.