Residents of California run the gamut of living situations. From the urban apartment-dweller to the rural farmer, estate planning attorneys in California see it all. The worst, though, is when we do not see individuals or business owners until it is too late because they mistakenly believe estate planning was unnecessary because there is “not much cash involved.”
This can be a major problem in all kinds of situations, but in those where land is part of the equation, it can be devastating. For example, a local farmer, or perhaps even a homeowner with a few acres of land might not have a lot of operating capital or a large savings account, but there is still significant value in the land and equipment they own and operate. In fact, the value of that land and equipment can end up posing its own special difficulties if a solid estate plan has not been put into effect.
Land typically comes in one of two ways: it is inherited, or it is purchased. In either case, there is a pretty reasonable chance that the land is going to increase in value between the time it was obtained and the time that the owner passes away. Unfortunately, the value of that land is going to become very important when it comes time to pay taxes after death. Even if you have very little money in the bank, the government will see that land (and buildings, equipment, etc.) as assets that need to be taxed.
So, what happens when you look wealthy on paper but do not have the actual cash necessary to pay taxes out of pocket? In most cases, the answer to that question is not a pleasant one. Imagine family land that has been passed down through the generations but is now so “valuable” that the only way to pay for it is to sell it off! California estate planning lawyers see situations like this arise far too often.
One of the only ways to avoid this gloomy fate is to sit down in advance and work out a plan with an experienced planning attorney. We can give you some insight into how estate taxes currently work, and help you create trusts and other protections to avoid paying more than you absolutely have to. Keep in mind, though, that just as the value of your land and equipment will continue to change over time, so too will estate taxes and applicable laws.
Whether or not you are “cash-poor,” if you own land, it is in your (and your heirs’) best interest to go ahead and develop a strong relationship with a California estate planning attorney and then revisit your estate plan at least every three to five years to make changes if and when they become necessary due to changes in value or the law. If you don’t currently have a relationship with an attorney and you’d like to get started, we invite you to contact one of our estate and elder law attorneys located throughout the state of California by contacting (800) 244-8814.