Special use valuation is an estate tax provision, often associated with Internal Revenue Code Section 2032A, that allows certain real property used for farming or closely held business purposes to be valued based on its current qualified use rather than its highest and best market value. This can significantly reduce the taxable value of family farms and ranches, lowering estate taxes and helping heirs retain the property. Strict requirements apply regarding family ownership, active business use, and post-death continued use; failure to meet them can trigger recapture of tax benefits. Special use valuation is a key tool for families whose land would otherwise be valued at development or speculative prices far above its productive income capacity.

Estate planners consider special use valuation for clients whose estates include large tracts of agricultural or business property that could be difficult to keep in the family if taxed at full market value. They analyze eligibility, run comparative valuations, and explain the ongoing obligations to heirs, such as continuing farm operations for a specified period. Life insurance is often layered on top of special use valuation strategies to provide liquidity for any remaining estate tax and to hedge against potential recapture. Advisors who understand special use valuation can help family business and farm owners explore ways to preserve both land and operating enterprises across generations while managing estate tax exposure.