Tax Advantages of Keeping Land in Your Family

Can Ausbon Sargent help keep land in your family?

Your heirs may not be able to afford to inherit your land!

2017 Update:   Estates valued at $5,490,000 and under are exempt from the estate tax.

If the value of your total estate in 2017 (including cash, stocks, bonds, bank accounts, life insurance, personal belongings and real estate) exceeded $5,490,000, the amount above $5,490,000 was subject to a maximum federal estate tax rate of 40%.    In addition, without congressional action, the geographic limits that were removed from the 2031(c) exemption (mentioned below) will return.

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 are guaranteed income.

Land conservation was given a boost with the passage of the Taxpayer Relief Act of 1997. The law under Section 2031(c) 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 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 $500,000, regardless of where the land is located. Previously, the exclusion was limited to land within 25 miles of a metropolitan area, a national park, or a federal wilderness.

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. A good resource on tax policy is the Land Trust Alliance website at www.landtrustalliance.org If you are interested in learning more, please contact the Ausbon Sargent office at (603) 526-6555.