Tips on estate planning for land owners

WAYS TO AVOID BITTER FIGHTS OVER INHERITED PROPERTY

* Accept that it's not always possible to divide things equally. You could try to avoid disputes, for instance, by leaving one child cash and other assets and another child land, says estate planning lawyer Jimmy Narron of Smithfield.

* Leave specific instructions for how an executor should divide land. For instance, ask your executor to commission a survey after your death and give the northern half of a property to one child and the southern half to the other, Narron said.

STRATEGIES FOR MINIMIZING TAXES ON INHERITED LAND

* Take advantage of all estate tax exemptions. Currently, estates worth $2 million or less are exempt from federal estate taxes of up to 45 percent (the exemption increases to $3.5 million in 2009). If both spouses take advantage of their exemptions, the family can double what can be passed on tax-free.

* Time your death wisely.

Just kidding. Currently, the estate tax is scheduled to fall to zero percent in 2010, before rising to a maximum of 55 percent in 2011 with a $1-million exemption. But no one in the tax community thinks that will actually happen, Narron said. Last year, the Senate voted 97-1 to extend the 2009 estate tax levels through 2012.

* Minimize the appraised value of your property.

* Hire an appraiser to lower the valuation of your property.

* Consult a lawyer about putting your land into a trust.

* Put a conservation easement on your land. Congress recently re-approved tax incentives for this, but be sure you're willing to permanently restrict development on your land before you commit.

* Find ways to keep the land in the present-use value tax program, which levies significantly lower property taxes on farms and woodland. Otherwise, you could owe hefty taxes.

GIVING PROPERTY AWAY WHILE YOU'RE STILL ALIVE

Under IRS rules, you can give away up to $12,000 a year per person without triggering up to 45 percent in gift taxes. With land, the donor can slowly deed an interest in a property to others.

PROS: The law favors donors with lots of beneficiaries. Keeping a single deed versus subdividing the property can also save on surveying and appraisal bills and help keep the lot large enough to qualify for present-use value property tax rates.

CONS: Any beneficiary has the right to pull his or her share out immediately after receiving the gift, says lawyer John K. Cook of Wake Forest. Some lawyers recommend family LLCs as an option to maintain more control over gifts to heirs.

North Carolina is also one of only four states with its own gift tax. Rather than having a $1 million lifetime exemption beyond the $12,000 per person annual exemption as in the federal system, the state only allows a $100,000 lifetime exemption for ancestors and descendants. State lawmakers are considering a change to make the North Carolina gift tax more like the federal gift tax.