Tax advantages of keeping land in your family
Ausbon Sargent can help keep land in your family?
Your heirs may not be able to afford to inherit your land!
Facts: If the value of your total estate in 2009 (including cash, stocks, bonds, bank accounts, life insurance, personal belongings and real estate) exceeds $3.5 million, the amount above $3.5 million is subject to a maximum federal estate tax rate of 45%. In coming years, the estate tax threshold will increase in steps until 2009. For the year 2010, there is no estate tax. In 2011, the estate tax will be reinstated with a $1 million unified credit and tax rates up to 55%.
The tax is due nine months from the date of death. For estate tax purposes, your land will be assessed at its "highest and best use," which is generally the property’s highest development potential. Existing Current Use status is not considered!
Some land protection methods that may help you:
• Give a conservation easement during your lifetime or by bequest to a qualified conservation organization, such as Ausbon Sargent. Permanent removal of development potential reduces the land’s value.
• Give the land as an outright gift to a qualified conservation organization, such as Ausbon Sargent, and take a charitable income tax deduction while you’re alive.
• Establish a trust. - Various types are available, including a charitable remainder trust, from which you receive a guaranteed income.
Land conservation was given a boost with the passage of the Taxpayer Relief Act of 1997. The law allows up to 40% of a property’s value to be exempt from estate taxes if the land is protected by a conservation easement.
To qualify, the parcel must be within 25 miles of a "metropolitan statistical area," making some of the ASLPT’s coverage area eligible. The decedent or a family member must have owned the property for three years prior to death. The exclusion is subject to several additional requirements and is capped at $200,000 in 1999 but increases to $500,000 by 2002.
The provision allows heirs to place conservation easements on inherited land after the landowner’s death. This enables your heirs to qualify for the exemption and avoid paying higher estate taxes.
As with any tax legislation, there are a number of questions that have yet to be answered with respect to terms and interpretation. You are cautioned that this law is evolving and this information is subject to change. You should consult with a tax attorney about the law’s implications for you.
Ausbon Sargent encourages you to talk with your family about the future of your land; then consult your attorney and a conservation organization such as Ausbon Sargent.