Thinking About My Legacy


Such is probably the circle of life, growing up I never thought about my legacy. When you are young, death is an abstract concept. But as I get older and death goes from abstract concept to a certainty with a ticking clock, it starts to fill up more of my idle thinking. What do I want the world to look like when I am gone?

I grew up on a farm and for the most part, know nearly every inch of it well because I spent time on every inch of it turning seeds in the soil into a crop that could be sold for money to pay the bills. After I left the farm for a career in engineering, the farm continued to grow so I don't know some of the newer parts like I do the original parts, but it feels like a home to me. For those on the outside, it is a piece of dirt that grows crops on it during the summer but for me, it is decades of my life and the memories that we made on that land. 

So it was a bit of relief and not much of a surprise when my parents told me that they planned to give us the land someday when they were gone and their wishes were that we didn't sell any and keep it intact. My brother and I were agreeable to that but knew that at some point, we were going to have to do some significant planning in ordering to turn that desire into reality.

Under current tax laws, when you die the government wants it's share of what you have scraped together over the course of your life and they do that by taxation. How much you are taxed depends on where you live and what things you owned upon your death. If you have a bank account, it can be as easy as just giving the government a set percentage of the money in that account and you can keep the rest. But when your asset is something more permanent like land, it can become tricky. I can't give the government a percentage of the land. They require cash. This causes many in similar situations to have to sell some of the land in order to pay the tax bill, something that went against my parent's wishes. Then you can expand the time horizon a bit and with every new generation the land passes to, there is a new tax bill to be paid and as the land increases in value, so does that amount of taxes to be paid. This was the conundrum that my brother and I have been contemplating for the last couple of decades since our parents told us their wishes for after they were gone.

Another layer that has been on our minds is personal attachment to this land. My brother and I grew up on the land. We have probably ingested and breathed in enough of the soil over the years that it is part of our genetic makeups at this point. Our children however are different stories. They grew up off the farm and have only visited it as we visited it. They don't have the memories or the attachment to it that we do. Their kids will have even less attachment and their grandkids even less. When something becomes less meaningful to each succeeding generation and practically speaking, as the numbers of descendants expands and the farm must be shared between more people, the inherited value also becomes less. As some point, the value isn't going to be worth the trouble for something that you have no personal attachment to and the likelihood of it being pieced out and sold increases.  

So what does a person do? That is something we started off to solve about a year ago.

Comments

  1. Ironically, I recently attended a seminar on leaving a legacy. Writing your history with the land might help your children and their children to understand its importance. The good news is on the tax side. Estate tax exemptions, at least at the federal level, are high and you don't pay taxes until the estate is over $15 million. Of course, there may be estate taxes. Good for you for thinking about this. We finally got around recently to updating our wills for Virginia (and we've only lived here 6 years).

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    1. Our solution, written about in the next post, does take advantage of the estate taxes currently on the books, will provide for myself and my children during all of my lifetime and most of theirs, and protect the land for eternity, at least as long as someone is around to enforce it.

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  2. We don't have a lot of inheritance taxation up here, but there is some wrt holiday properties etc. I don't think they are very onerous. I will be interested to read your plan. It seems to me that you have done well by honouring your parents' intentions for as long as you have.

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    1. Our solution will be in Wednesday's post. I broke it up into three chunks because I felt it overwhelming all in one long post.

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  3. Well, I'm glad you're going to follow this up in another post, as I'm curious about what you did. Estate taxes in the USA don't kick in until quite a bit of money is involved, so that should help. (Unlike the UK, where estate taxes start at about £375,000 of inherited wealth, if I remember correctly.)

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    1. There is also state inheritance taxes to consider as well so just because one is under the threshhold for federal, doesn't guarantee that you will be under state levels. But all will be revealed in my next post.

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  4. Very thought-provoking post. Barb and I do not really have a legacy to leave behind. I guess it would be this house that we built from the ground up with our own two hands. We recently filled a transfer on death to our two children and would love it if one of them lived here, be that is asking a lot. Our friend De who recently passed had 4 quarters of land that were transferred to her 4 children upon her death.

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    1. One of the complicating factors is that this is nearly a century farm. My grandfather started it when he returned from the war.

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  5. A trust with a number of trustees is my best guess...I can understand. The land we own and built our home on a joins my brothers and my Dad always said keep it in the family. WE all inherited land from our Dad. We are doing lots of talking also. What makes sense to do????

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    1. A wise guess. For us, honoring our parent's wishes was probably the number one goal of this entire process.

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    2. Difficult questions. Tax laws are aren't as harsh here.
      factory farms are coming and the family farm will someday disappear.












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    3. For the most part, farms are only becoming larger here largely due to the laws we have enacted and policies we have chosen. Like any other group of people, they have been forced to adapt to survive and if they don't, they disappear. The farmer isn't at fault.

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  6. It's wise to plan for the future which, as we know, will include our children and grandchildren (and so on) but not us. We can make smart financial decisions that will help out when we die. I gift the maximum or even more every year to keep my total estate under the Washington State threshold for estate taxes. You can't really do that with land though.

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    1. No and therein lies the dilemma. I think we came to the best solution we could under the circumstances.

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  7. Your last sentence is something of a cliff hanger! Yes, it is a conundrum. I know of one family where the son who wanted the farm bought it from his parents before they died. His mother continued to live there until, but her estate was mostly just her bank account which made things easier for the son to keep the farm.

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    1. Fortunately it was small enough that the son could purchase it. Due to circumstances out of their control, farmers have had to get bigger to survive and as a result, purchasing the farms in their entirety becomes an impossibility. Only bigger farms can afford to buy and there in lies the problem.

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  8. Ed, this is exactly part of the conundrum that we faced with The Ranch. Na Clann had good memories of it, but we had all been up there much less in general because life took us different places. We talked (briefly) of a land trust, but circumstances (and to be fair, energy) waned. The next best thing is to see what kind of legacy, even if non-land, we can leave.

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    1. I thought about your process many times as we were going through this.

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  9. Land can be so much more than an asset when it holds generations of memories and family history. I’m looking forward to hearing how you and your brother decide to honour your parents’ wishes while planning for the future.

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    1. As I write this comment, the answer will be revealed in about 20 minutes.

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