Have you watched Yellowstone? If you’re caught up on the Dutton family saga, you’ve seen the incredible lengths John Dutton went to in order to protect his beloved Yellowstone Ranch. The season finale wrapped up with more drama, betrayal, and heartbreak, but one thing remained constant: the ranch’s uncertain future. While the show thrives on high-stakes drama, John’s estate planning—or lack thereof—wasn’t just intense; it was completely unrealistic from a tax standpoint. In this post, we’ll look at how the Duttons’ approach misses the mark in real-world estate tax laws and explore smarter strategies they could’ve used to preserve the ranch – without all the chaos.

Why Yellowstone’s Estate Tax Drama doesn’t align with Reality

The Yellowstone storyline around estate taxes makes for gripping drama but strays far from how estate tax law works in the real world. Let’s break down the key ways the show’s portrayal deviates from reality:

1. Exaggeration of Estate Tax Impact
   • Fictional Portrayal: The Duttons risk losing their ranch due to crushing estate tax liabilities after John Dutton’s death.
   • Reality: For 2024, the federal estate tax exemption is $13.61 million per individual ($27.22 million for couples). Most estates, including family farms, fall below this threshold and owe no estate taxes.
2. Ignoring Family-Owned Business Protections
   • Fictional Portrayal: The show suggests that estate taxes are unavoidable and devastating for family-run operations.
   • Reality: Tax law includes provisions like:
     • Section 2032A: Special valuation rules for farms and businesses to reduce taxable value.
     • Installment Payments (Section 6166): Allows estate taxes on family businesses to be paid over 15 years with low interest.
     • Portability: Unused estate tax exemptions can transfer between spouses, minimizing tax burdens.
3. Misrepresenting State Tax Laws
   • Fictional Portrayal: Montana is shown as a hotbed for estate tax woes.
   • Reality: Montana has no state estate tax. Only a handful of states impose estate or inheritance taxes.
4. Overlooking Charitable Deductions
   • Fictional Portrayal: The Duttons’ sale of the ranch to a tribe was depicted as a dramatic, last-ditch effort to preserve the land.
   • Reality: Proper estate planning could have leveraged the estate tax charitable deduction to offset taxable value. While it’s possible the tribe could qualify, the IRS would deny the deduction if charitable intent wasn’t outlined in advance in estate documents. Other qualifying organizations could have received the ranch, preserving it for charitable purposes in perpetuity and saving estate taxes. Proactive planning would have been essential to make this work.
5. Lack of Estate Planning
   • Fictional Portrayal: The Duttons appear reactive, not proactive, when it comes to planning for estate taxes.
   • Reality: Wealthy landowners like the Duttons would likely use estate planning tools such as:
     • Irrevocable Trusts: To remove assets from taxable estates.
     • Conservation Easements: To lower property values for tax purposes.
     • Lifetime Gifts: To reduce estate size gradually.
6. Emotional Appeal vs. Practical Reality
1. Fictional Portrayal: The storyline thrives on emotional appeal and dramatization of government overreach.
2. Reality: While estate taxes can be complex, they rarely threaten the survival of multi-generational family businesses that use appropriate planning.

In short, Yellowstone exaggerates for dramatic effect, creating a worst-case scenario that doesn’t reflect the legal tools available to real-life ranchers.

How the Dutton’s Could Have Preserved the Ranch

If the Dutton family had embraced proactive planning, they could have minimized or eliminated estate tax concerns. Here’s how:

1. Lifetime Gifting
   • How It Works: John could have transferred portions of the ranch to his heirs using the annual gift tax exclusion and the lifetime gift tax exemption ($13.61M in 2024).
   • Benefit: Reduces the estate size and shifts future appreciation out of the taxable estate.
2. Irrevocable Trusts
   • How It Works: Transferring assets to special trusts like GRATs, SLATs, or IDGT trusts, removes them from the estate at discounted gift values.
   • Benefit: Shelters future asset value appreciation and preserves more of the estate exemption via lower values.
3. Conservation Easements
   • How It Works: Restricting the ranch’s future development could reduce its value for tax purposes.
   • Benefit: Major estate tax savings while maintaining the land’s character.
4. Family Limited Partnerships (FLPs) or Family LLCs
   • How It Works: The ranch could be transferred into an FLP or Family LLC, with shares passed to heirs over time.
   • Benefits: Valuation discounts and control retention for John while transferring ownership.
5. Installment Payments for Estate Taxes (Section 6166)
   • How It Works: Allows taxes on the ranch to be paid over 15 years with low interest.
   • Benefit: Prevents forced asset sales to cover taxes.
6.  Spousal Portability
   • How It Works: Using John’s late spouse’s unused estate tax exemption could double his exemption to nearly $28M.
   • Benefit: Protects more of the ranch’s value from estate taxes.
7. Life Insurance in an ILIT
   • How It Works: A life insurance policy held in a trust could cover estate taxes.
   • Benefit: Liquidity to pay taxes without selling ranch assets.
8. Charity as the Primary Estate Beneficiary
   • How It Works: John could have had the fanch pass to a qualifiying charitable organization.
   • Benefit: Provides tax deduction and reduces the taxable estate.
9. Proactive Valuation
   • How It Works: Regular appraisals could help manage expectations and provide accurate information for decision making to mitigate estate tax.
   • Benefit: Ensures a realistic estate plan is in place.

The Bottom Line

If the Dutton family’s last-minute decision to sell the ranch to the tribe for $1 per acre occurred after John Dutton’s death, it would not have avoided estate tax liability. Here’s why:

1. Fair Market Value (FMV) Requirement:
   The estate would need to include the ranch at its FMV in the taxable estate, regardless of the price for which it is later sold. Selling the ranch for $1 per acre would not reduce the estate tax liability because the IRS values the property at its FMV, not the artificially low sale price.
2. Post-Death Sale Consequences:
   If the estate sells the ranch for $1 per acre, this transaction would result in a significant loss of value to the estate. The difference between the FMV and the $1 per acre sale price would either be considered a los or donation (to the tribe), neither of which would qualify for an estate tax deduction.
3. Fiduciary Duties:
   Executors of the estate have a fiduciary duty to maximize the value of estate assets for the beneficiaries. Selling the ranch for far below FMV could expose the executor to legal challenges from heirs or beneficiaries for breaching this duty.

That said, the Duttons’ last-minute decision raises an important point: it’s possible the tribe could have qualified for the estate tax charitable deduction, which would offset the taxable value of the ranch. Even if the tribe didn’t qualify, countless charitable organizations could have accepted the ranch, preserved it in perpetuity for charitable purposes, and prevented future development—all while significantly reducing the estate tax burden.

The Key Takeaway:
The Dutton family’s failure to plan in advance was their greatest misstep. To qualify for the estate tax charitable deduction, charitable intent must be documented in estate planning documents before death. You can’t decide to donate property after death and expect the IRS to honor the deduction—without prior planning, the IRS would deny it, and estate taxes would still be owed.

This situation is an excellent case study in proactive planning. By utilizing tools such as conservation easements, irrevocable trusts, or transfers of value during lifetime at discounted values, the Duttons could have:

• Preserved the ranch for future generations,
• Reduced or eliminated estate taxes, and
• Retained some or all ownership of the land.

Ultimately, Yellowstone Ranch’s fate underscores a vital lesson: thoughtful, strategic estate planning is essential to preserving generational wealth and protecting cherished family legacies.

About the Authors