What to Know When Including Raw Land in Your Estate Plan: Advice from a Broken Arrow Estate Lawyer

Owning a piece of undeveloped land can be an exciting investment, full of potential and possibilities. However, including this asset in your estate plan requires careful thought. As a Broken Arrow estate planning and real estate attorney, I help clients address raw land properly in their estate planning documents. Here’s what you need to know:

Understanding and Communicating Value

Raw land can be a complex asset to value and explain to your heirs. Unlike developed property, its worth may not be immediately apparent. Start by hiring a professional appraiser to determine the land’s current market value. The appraisal should consider location, zoning, and potential for future development.

Once you understand the land’s value, communicate it clearly to your heirs. Share your vision for the property and explain why you believe it holds value. Perhaps you see it as a future home site, a potential commercial development, or a conservation opportunity. Whatever your reasons, make sure your heirs understand your perspective.

Financial Considerations

Owning raw land comes with financial responsibilities. Your heirs must be prepared to pay property taxes and maintain the land. If the property has a mortgage, your estate plan should specify how your heirs will handle the payments.

Also, consider the potential tax implications. If the land has appreciated since you purchased it, your heirs may owe capital gains taxes if they sell. A Broken Arrow estate planning and real estate attorney can help you create strategies to reduce tax burdens. This preparation ensures your heirs can handle the financial aspects of inheriting the land.

Estate Planning Options

There are several ways to handle raw land in your estate plan.

Lifetime Gifts

You can make a gift during your lifetime. However, this usually causes negative tax consequences and may result in higher capital gains taxes for the recipient.

Wills

You could leave the land outright to your heirs through your will. This option may not be ideal if you want specific control over the land’s future use or want to avoid probate.

Trusts

Placing the land in a trust gives you more control over how it is used or disposed of after your passing. For example, you could create a trust with instructions to keep the land undeveloped for a certain period. You could also specify other purposes for the land. Trusts can preserve a “step-up in basis,” reducing capital gains taxes if the land is sold.

Life Estates

Some landowners choose a life estate. This option allows you to use the property during your lifetime while designating who will inherit it afterward. Life estates let you enjoy the land now and secure its future. However, you must structure them carefully to avoid unexpected problems.

Preparing Your Heirs

No matter which estate planning option you select, you should prepare your heirs for the responsibilities of inheriting raw land. Introduce them to local real estate and development professionals. These experts can provide guidance on the land’s potential uses and value.

Provide your heirs with all relevant property documentation. Include the legal description, easements or rights-of-way, and details about any partners or advisors involved in your plans.

Conclusion

Including raw land in your estate plan requires careful consideration and clear communication. By working with a knowledgeable Broken Arrow estate planning and real estate attorney, you can ensure that your wishes are respected. You can also prepare your heirs to manage this unique asset. With proper planning, your investment in raw land can become a lasting legacy for future generations.

If you need assistance starting this process, we are here to guide you. Contact us at 918-608-1836 or click here to schedule an appointment with our Broken Arrow estate planning and real estate attorneys. Mention this article when you call, and we will discuss your situation and help create an estate plan that protects your raw land investment and honors your wishes for its future.