For landowners who have properties they no longer need or feel that may not be affordable to keep, top dollar offers from developers can often feel like the most attractive option. But these quick cash-outs can be short-sighted when it comes to wealth planning and legacy building.
This is especially the case for families who have an emotional attachment to property or are concerned about the potential impact of development on land, local ecosystems or the wider environment.
Enter land trusts—legal, non-profit organizations that aim to help landlords preserve and protect their land. They can be essentially modern-day wealth planning tools that, when structured appropriately, can yield big gains, provide better long-term planning and advanced retirement benefits while supporting environmental sustainability or family heritage goals. Huh.
Still, most of the households are unaware of these devices as they are complex and require special expertise to operate. This expertise is generally not possessed by financial advisors when clients are accustomed to consult on money matters.
Take, for example, a New Jersey couple who bought a 1750 farmhouse on 10 acres in 1976 because they were excited about raising four children in the country. They gradually added land and learned to farm with Angus cattle, but their concern was that a developer would eventually try to buy adjacent open property they did not own at the time, build housing and allow their country to live. and put to farming. Dreams at risk. He wondered whether he should face that risk by selling his land.
I put them in touch with the Delaware and Raritan Greenway Land Trusts to figure out strategies to help them maintain the land they cherish, as well as the assets they cherish, financially for the long term. works for them.
When you sell to a developer, you not only lose the ownership of the land and the ability to live on it, but you also run the risk of paying higher taxes along with capital gains and roll back taxes. With patronage, you can choose to sell/donate only the development rights, allowing you to retain ownership and continue to live on the land. The deed of property will be restricted which prevents all current and future owners from ever building on the property.
Another customer family of ours initially believed that selling their 200 acres of agricultural land to a developer would be the most profitable way. But after hearing the concerns of the city mayor, who wanted to preserve the land to prevent population growth and keep the city’s resources from becoming more strained, the landowners agreed to entertain the idea of ​​a land conservation transaction. . As a result, the family not only received the same financial compensation as if they had sold to a developer, but also benefited from tax benefits. In the end, they were able to help protect a prized piece of land in their community.
When it comes to wealth planning it is important to understand the short and long term financial needs of the customer. But it’s important to take a thoughtful, holistic wealth planning approach to understand what a client really holds dear. In today’s increasingly complex world it is also important to take into account what may be the easiest and most expedient way to develop properties and all the resources available to build, conserve and protect them.
I have seen many times the profound impact that such thoughtful approaches and creative solutions can have on generations of families and their communities at large.
Wade Martin Martin Wealth Management Group, RBC Wealth Management – US . is the managing director of
Example provided for illustrative purposes only. It does not necessarily represent the experiences of other customers, and is not indicative of future results. Results may vary. RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of a land conservation transaction must be made in relation to your independent tax or legal advisor. RBC Wealth Management, a division of RBC Capital Markets, LLC, Registered Investment Advisor and member of NYSE/FINRA/SIPC. RBC Wealth Management is not affiliated with Delaware & Raritan (D&R) Greenway.
