More Than Money
Issue #32

Passing the Torch: The Great Wealth Transfer

Table of Contents

“Family Lands”

An Interview with Olivia Boyce-Abel

Interviewed by Pamela Gerloff

MTM: What prompted you to start Family Lands Consulting?

Boyce-Abel: My business grew out of my own personal experience, both as a beneficiary of my grandmother's trust and as executor of my mother's estate. My siblings and I ended up in 13 years of litigation and five different lawsuits over our family land in South Carolina. My mother hadn't communicated clearly with us siblings, and there were other relatives involved, which made things complicated. (This is very common in families.) After doing a 13-hour deposition and my fifth lawsuit, I decided I didn't want others to have to go through that experience. Now I help people avoid those kinds of problems.

MTM: When you talk about land transfer do you mean family farms, beach houses, vacation homes?

Boyce-Abel: Yes, but also any sort of property, like stocks and bonds, Nobel Prize medals, art collections.

MTM: What's different about transferring land, as opposed to money?

Boyce-Abel: Land is more complicated than funds, or even stocks and bonds, because typically, land holds more sentimental value. It brings up strong emotional attachments, both positive and negative, to a family's legacy. Almost every family dealing with land transfer issues has someone who wants to sell, someone who wants to stay on the land, and someone else in the middle. That's a repeating dynamic of families. For instance, I know of one family whose members are in conflict over their ranch. One branch of the family loved going to their summer home on the ranch and wants to pass it on to their children. Another branch of the family with a history of alcoholism associates the ranch with negative childhood memories. Now that it's time to inherit the land, those children want to be rid of it. To lose the ranch would be devastating to the former group of children, while the latter can't wait to sell to a developer.
Even though family stocks, like Sears & Roebuck or Coca- Cola, may have a sentimental value, stocks are not the same as a family place where you know that your great-grandfather sat, your father hunted, or your grandmother tinkered and gardened. Stocks, bonds, and liquid assets can be divided up, but people who are given money from the sale of land are often devastated. If you have an emotional attachment to a piece of land, you tend to want to be sure your family can continue to own it.

MTM: You sometimes talk about equitable distribution of land, as opposed to equal. What's the difference between equal and equitable?

Boyce-Abel: Equal would be dividing something equally among all the heirs—each gets the same amount. Equitable might mean that an inheritor who has more financial or emotional difficulties would receive more, or someone who has done far better financially than the other siblings and may not need as much would receive less. But if you choose to leave "equitable" portions, you need to discuss it first with your heirs. In the United States, we do equate money with love, so if chil- dren are not left equal amounts, they are likely to feel shortchanged unless there has been a dialogue about it first. I find it fascinating that parents will often assume that because they have given parcels of land to each child, there will not be an issue over the land—and yet there is, if they haven't found out what the children want.
One wealthy family had placed conservation easements on much of their land and had given various estates to each of their children. However, they had not talked to their children about which child wanted which piece of land. When I talked to the children, there were many strong feelings about which child wanted what. (These were beautiful, thousand-acre tracts.) You can divide things in an equitable way that works for everyone and acknowledges that there are some differences, but the experience of receiving the inheritance is very different when it comes from the child's own choice. By talking about it ahead of time, you can make a plan that makes everyone feel loved.

MTM: What other mistakes do people make when transferring land and how can they avoid making them?

Boyce-Abel: The biggest mistakes are:

  • Failure to start soon enough
People need to begin planning ahead now. I would like to see all wealth transfer work done with a mediator or trained facilitator from the outset. When everyone is at the table, it makes a big difference. Many times I have seen parents change their decisions based on information they get during meetings with their loved ones and a mediator.

  • Failure to consider family dynamics
So often parents say, "I'll leave it to them and they'll figure it out." But parents need to be asking critical questions like, "Are there people who don't get along? Should they be owning land together?" I always try to remember what psychologists say: that 95% of what's going on in conversations is old baggage. Only about five percent is really relevant. For instance, when I'm talking with my siblings, I'm little Olivia again. When I'm with others who see me as a successful businesswoman, I'm mature Olivia. There are all sorts of family dynamics, including sibling rivalries and misunderstandings, that occur whenever land or family possessions are involved.
  • Failure to communicate
The best thing to do is to have a series of family meetings where family members have the opportunity to communicate openly. Neuropsychologists say that it takes two years to return to a normal state after the death of a loved one. So the worst time to be figuring out a land or wealth transfer is when grieving a loss, death, or divorce. By having conversations now about the land with your loved ones, things are more likely to be smooth. You can help your heirs understand how and why you've made your decisions.
In the years ahead, summer home ownership will be transferred to a new generation at a rate unprecedented in realestate history. Vacation home ownership rose 13% in the 1990s, to 3.5 million homes. Today, one out of every seven homeowners over age 65 also owns a second home that must be factored into their estates.
—From "Mom Always Liked You Best: Who Gets the Beach House?" by Jeffrey Zaslow, The Wall Street Journal , August 15, 2002, at www.familylands.com/article5.html
  • Failure to establish a governance structure
The worst thing you can do is to leave the land to tenants in common without a clear decision-making structure. If potential tenants in common can't agree before they own land together, there is no way they are going to be able to agree when they suddenly become joint land owners, unless you have set up a governance structure for them to follow. Otherwise, if any of the tenants won't listen to the others, the only way to object is to take the others to court. I've seen a number of cases where there is one family member everyone else thinks is crazy. But how crazy would you be—if the others have more money than you do and are spending it on things for the property that you don't support? Having a governance structure in place before you die is in fact the most important step in planning for a land transfer. I would recommend the following:
  • Have a buy-out plan
For example, you might give rights of first refusal to family members.
  • Create an endowment fund for land maintenance and capital improvements
Everyone wants to see property with the fields mowed and the raspberry patch weeded, but typically, as land goes to the next generation, the heirs don't have the same kind of cash flow that the parents had and it is difficult to get heirs to agree on how much should be spent on upkeep. An endowment fund works well to ensure financial sustainability.
  • Consider what to do in cases of divorce
Will in-laws receive part of the land or not?
  • Provide for the rotation or replacement of trustees or decision-makers
Trusts run the risk of having a single trustee who has all the control or power. Providing a structure for rotating and replacing trustees helps make the process more democratic. You can also set up an advisory board to the trustees, to keep them up to date on what's happening with the family property. And you might include a clause to ensure that the trustees will mentor the next generation.
  • Re-assess the plan every three to five years, as needs and situations change
  • Begin to mentor the next generation

Finally, it's important to begin preparing the next generation early in their lives. Unless you involve them, you run the risk that they will not know, or care, how to run the land. Children love to feel involved, important, and needed. Even if they are just clearing brush, making decisions about issues such as what areas to clear can give children confidence, autonomy, and self-esteem.
You also can begin early on to talk to your children about the legacy of the land. You can tell them, for example, "This is amazing land that our great-grandfather bought for us. I would like to see it preserved forever. You will have this land some day and it will have conservation land easements on it." You can talk to them about what land and ecology mean, and the special environmental characteristics of your land. Author Wendell Berry is very eloquent about this. He says you can't really understand land until you've been on it for a number of years. In farming, this might mean understanding how the land's drainage systems work or why certain things can be planted in one place and not elsewhere. For other types of property, it might mean taking children with you to repair the boathouse, or teaching them about the ebb and flow of tides and how much it costs to build the seawall and why you have it. Or it might mean letting them help stain the deck or rebuild the stairs. Children are never too young to learn how to steward the land.
I'm working with a family now where one branch wants to stay involved in the land and the other doesn't. Some who want to stay in are only 18 and 19 years old. They have a grasp of how the property needs to be managed and are making points nobody else has made. Sometimes members of the younger generation may be able to bring together families that have been estranged or have miscommunicated for years. They can provide a more neutral voice continued on p. 20 and are able to move through conflicts in a way that the older generation can't. In my experience, the people who educate and mentor their children about land stewardship have a much better chance of a successful outcome.

MTM: What if you don't have family to leave your land to or you choose not to leave it to family or friends? What other kinds of options do you have?

Boyce-Abel: There are a number of options, from creating a charitable nonprofit foundation to donating the property to a charitable organization of your choice. You can donate land outright to a group such as your local land trust, The Nature Conservancy , The Trust for Public Land , or the Audubon Society . I want to emphasize, however, that clear restrictions and conservation easements must be placed on your land prior to gifting —no matter who the recipient is—otherwise the land could be sold for top dollar. As long as you place conservation easements on your land, you can sell or gift it to any buyer and it will be protected. If agriculture is important to you, you can contact FarmLink to hook up with beginning farmers who want land for farming (see www.californiafarmlink.org or check the Internet to locate a branch in your state) or you can place agricultural conservation easements on your land with American Farmland Trust .

Olivia Boyce-Abel is the founder of Family Lands Consulting ( www.family lands.com ) and Boyce-Abel Associates. Her work as a family mediator involving estate planning and wealth transfer includes facilitation and environmental advising around land issues.


© 1990-2005, More Than Money, All rights reserved