Estate planning is for every landowner. Your land is part of your legacy. You have been a good steward of your land, carefully making decisions about its use. Planning what will happen after you are gone is the next critical step of being a good steward. In fact, it may be the most important step you can take as a landowner—not just for your benefit, but for family, your community, and the land itself.
The hardest step to plan for your land is often the first one. Your Land Your Legacy: Planning for Every New Hampshire Landowner is a primer for landowners interested in learning about conservation-based estate-planning tools enabling you to determine who will own and care for your land into the future. Order a hard copy here.
An estate is the total of all your assets, including your land, house, bank accounts, and any stocks and bonds. An estate plan ensures that your assets are distributed in a way that will meet the financial and personal needs of you and your heirs.
Land is not like other assets—it may have significant personal value not typically associated with other assets, such as stocks and bonds. When dividing assets among family members, it can be challenging to account for their personal as well as financial needs.
The good news is that land is a flexible asset that lends itself to creative solutions for your goals and values whether or not you intend to keep it in the family.
This planning process takes time, and the earlier you start, the more options you will have for your land. Start by:
- Defining your goals
- Deciding if you want to determine future ownership
- Deciding if you want to determine future use.
Defining your goals
Begin by thinking about what you want most—to see your land remain undeveloped forever? to maintain family harmony? to preserve flexibility for your heirs? You may want to rank your goals in order of their importance, and list any challenges standing in the way of your goals.
If you own your land with others, your next step is to talk about your goals and values with your spouse or co-owners.
Involving Family in the Decision
If you have children, it’s up to you to decide to what extent you want to involve them in determining the future of your land.
Discovering your family members’ needs and wishes can take place either at a family meeting or through individual conversations. In either case, get a sense of your family’s personal and financial goals and how they feel about the land.
A family meeting is a forum in which family members can share their ideas and concerns. The goal of the family meeting is to give individual members the opportunity to express what the land means to them as well as their financial or practical needs, and to allow the family to hear the needs and wants of others. This can be accomplished by simply asking each person to talk about how he or she feels about the land. Together, this information can guide your next steps and inform your work with estate planning professionals. Learn more about holding a family meeting in Your Land Your Legacy: Planning for Every New Hampshire Landowner.
Sometimes a family’s dynamics prevent them from having healthy conversations about the future of the land. However, avoiding these important conversations now will likely lead to even more tension in the family later. A neutral person or a professional facilitator can often help guide these difficult conversations.
Though your goal may be for your family to agree on a plan for your estate, there may be situations in which families are not able to work together or agree. In this case, be prepared to take the input you have received; work with the necessary professionals; and do what you believe is right for yourself, your family, and your land. Do not get paralyzed by family disagreements. If you avoid planning because people don’t agree now, you can be sure the conflict will be greatly exacerbated after you are gone.
Defining the next step
Maintaining momentum is important. From these discussions, you should be ready to move forward by answering two important questions that can lead you to tools and professionals to help you reach your goals:
- Deciding if you want to determine future ownership
- Deciding if you want to determine future use.
Determining the Future Ownership of Your Land
If you are interested in determining who will own your land in the future, there are conservation-based estate planning tools that will help you achieve your goals.
First, look at your deed
A great place to start your planning is by reading your deed—which lists your current form of ownership—and understanding the implications of this form of ownership. An estate planning attorney, land trust, or forester can help you find your deed. Without estate planning, the form of ownership listed on your deed will determine who will get your land when you pass away—and it might not be what you want to have happen with your land. For help finding your deed, work with your attorney or forester.
If your current form of ownership doesn’t meet your needs for passing on your land, meet with an estate planning attorney to learn about other options for the ownership of your land.
Land ownership can be divided into two types—direct and indirect.
Direct ownerships are those in which a person or persons own the land directly. The names of the people who own the land are on the deed.
Direct ownerships are the most common form of land ownership. They are easy to set up and maintain, and all forms of direct ownership can be combined with land conservation tools. However, they do not provide individuals liability protection or a mechanism for the gradual transfer of land.
Land Ownership Agreements
Land ownership brings with it many benefits (recreational use, income from forest management) and responsibilities (taxes, maintenance). These benefits and responsibilities can be complicated when there are multiple owners. To reduce the likelihood of disputes, landowners who co-own land may want to consider a land ownership agreement. A land ownership agreement is a contract between two or more persons who own a piece of property together which clarifies each owner’s rights and responsibilities. A land owner agreement can be a very helpful tool for making multiple person ownerships successful.
Indirect ownerships are those in which land is owned by a legal entity rather than by a person.
Indirect ownership can be more complex to set up, but it does bring with it opportunities to protect individuals from liability, as well as the ability to gradually change or transfer the ownership, which can offer important tax benefits. Examples of indirect ownerships include partnerships, trusts, and limited liability companies (LLCs).
Using wills to determine who will own the land
A will, also called a “last will and testament,” is the most commonly used estate planning tool. A will is a legally binding document that states how you want your assets distributed once you have passed away. Make sure your will includes provisions for your land. In order to be effective at passing your land by way of your will, you need to ensure that the way you own your land permits you to pass it by way of your will—and that your will is written in a way that ensures it will achieve your desired goals.
Sharing your goals in a legacy letter
If you are interested in keeping your land undeveloped, but donating it to a conservation organization or placing an easement on it doesn’t meet your goals, an informal option is to communicate your intention for the future of the land through a legacy letter. A legacy letter—which can be attached to your will to provide additional information—is written to your beneficiaries and is intended to share your knowledge, beliefs, values, and hopes.
Determining the Future Use of Your Land
If you want to ensure that some or all of it remains in its natural state, there are temporary or permanent tools to help you achieve this.
Temporary Land Use Options
If you want to keep all or some of the land in the family, it is important to pass on to your heirs your knowledge of the land, including your goals for the property, how the land has been managed, who you have worked with, and any programs you may be enrolled in. If you have a forest management plan, share it with your family and use it as you develop your estate plan. Communicating this information to your family can help them become good stewards of the land. Learn more about your forest management options by contacting your local County Extension Forester.
A forester can help you evaluate your land management options, including determining the value of your timber for a land appraisal. The Directory of Licensed Foresters is a listing of foresters offering services to New Hampshire woodlot owners.
Current Use Assessment
Current use gives you an opportunity to significantly reduce your property taxes in exchange for keeping land undeveloped and producing public benefit. This is a temporary program, and it can be used in combination with other land conservation tools. Your County Extension Forester can answer questions about current use, or learn more here.
Permanent Land Use Options
A conservation easement (CE) is a legal agreement that extinguishes some or all of the development rights of the land forever but allows your other rights—farming, forestry, and recreation—to continue. With a CE, you maintain ownership of the land. A CE can be placed on all or part of your land, for example allowing you to reserve house lots.
A CE can be sold if the land has exceptional ecological or historical value. Alternatively, it can be donated, providing the landowner with a tax deduction for a charitable gift. Since the land can no longer be developed, a CE lowers its value, which can help lower your taxable estate. In these cases, landowners are required by the IRS to have the land appraised by a qualified independent appraiser to determine the value of the deduction. There are often costs for CEs to ensure that the terms of the easement are monitored and enforced in perpetuity.
Donating or Selling Land
Land can be permanently protected by donating it or selling it to a qualified conservation organization, such as a land trust, a state conservation agency, or a town. Donations of land may provide significant tax advantages as a charitable gift.
You can sell your land or CE at a price below its fair market value. The difference between the appraised market value and the sale price to a qualified conservation organization is considered a tax-deductible charitable contribution.
A donation of land or a CE through your will is another way to ensure your land’s permanent protection and potentially reduce your estate tax burden. You can change your will at any time, and a bequest does not become effective until your death.
Landowners sometimes negotiate a gift or sale of the property while reserving the right to occupy and use the land for life, with control of the property automatically transferred to the conservation organization upon the death of the landowner. The gift of a property with a reserved life estate can qualify the donor for a charitable deduction. Landowners are responsible for upkeep and all management costs during their lifetime.
It is possible to protect the majority of the land through one of the above tools while a small portion is sold or maintained by the landowner for future development.
Finding a Conservation Organization
Land conservation organizations may seem alike at first glance, but their missions and land management philosophies can vary greatly. Your property’s location, size, and natural resources all help determine which conservation organizations may be interested in working with you to conserve your land. It is important that any organization you work with shares your goals and personal philosophy about land and land management. To find a land trust or public conservation agency working in your town, visit the N.H. Land Trust Coalition.