The movie, Gone with the Wind, was as much about land as it was a romance during the cold realities of the Civil War and the following Reconstruction Period. In it, Scarlet’s father, Gerald tries to instill in Scarlett his appreciation of the land…
“Do you mean to tell me, Katie Scarlett O’Hara, that Tara, that land, doesn’t mean anything to you? Why, land is the only thing in the world worth workin’ for, worth fightin’ for, worth dyin’ for, because it’s the only thing that lasts.”
Though Scarlett is too wrapped up in her own drama to understand, it’s a lasting sentiment that stuck with her. Eventually, she gains that appreciation as she fights to save the land. Land is a lasting legacy – often bequeathed and passed down to generations upon generations but what is it today and why does it matter in your estate planning?
What is a Legacy Property?
Often a client will have a piece of real estate; a cabin, a lake house, or a beach property that has meant a lot to them. This is often referred to as “legacy property” in estate planning. However, that property may not mean as much to their loved ones. The client may not see that as it is often the client who purchased the property and most often, used it. In addition, many times real estate does not produce any income. It only costs money. Consider the following scenarios I’ve encountered in my practice and the issues that each scenario raises in estate planning:
The cost of land
We had a recent case where a client had a particular farm that they liked in Western North Carolina that the grandson and one of the daughters enjoyed walking on. As we discussed it in detail the client admitted that it cost a substantial amount of money per month to maintain the property and that he intermittently paid out large amounts of money to maintain the property. We who live in the mountains, have to cut the mountain back or the mountain will take our house or property.
Who pays ongoing maintenance, taxes, insurance, repairs?
We had another situation where there was a condominium on the beach inherited by three (3) siblings. The concern is will all three (3) pay equally for assessments, repairs, taxes and insurance? What if one doesn’t pay their share?
Equal use but not equal ability
We have another case where four (4) adult children inherited an over 100-acre farm that has been in the family for over 100 years. There are four children and only one of the children has ever made or saved any money. That adult child is moving toward retirement age. You then get into the question as to whether the other three siblings are going to look to the one who makes and saves money to pay all of the ongoing expenses on the 100 plus acre farm. The farm does not make money and it will take ongoing money to maintain and repair the farm plus pay the taxes and insurance.
Sell or not to sell? Who decides?
You have to think about whether that “Heirloom Land” or “Legacy Property” is feasible or not. You can always leave it equally as an asset to your children and the children may decide that one of them wants to buy out that property from the Trust. They would take that property as their share of the inheritance, or take it as their share and add additional monies on top of that to buy it. They may all agree to sell it, or they may not agree to sell it and you have a problem.
So when you think about your specific Estate Plan remember your “dream” may not be your loved one’s “dream”. If you leave a “Legacy Property” or “Heritage Land” to your loved ones for the use of the group, make sure to leave a large amount of cash in Trust for the taxes, maintenance, repairs and expense of that “Heritage Land” over time.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.