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Should You Provide A Gift to Your Tenant From an Estate Plan?

Should You Provide A Gift to Your Tenant From an Estate Plan?

October 13, 2016

If the land that you own has had a consistent tenant year after year performing operations such as farm work or running a business, chances are that you probably have a close relationship. When reviewing your estate plan, the question becomes whether or not you should include a monetary gift to your tenant. Whether it is a few thousand dollars or a few hundred thousand dollars, this is a decision that should be thoroughly thought through. Working with a financial expert who specializes in estate planning is your best bet to ensure that all parties involved are treated well. A financial advisor can walk through the goals that you have in place for your estate plan and help to make sure that those goals are achieved.

Gifting Options for Your Tenant

Each situation is unique, which is why there is not one true way to handle gifting for a loyal tenant that you have developed a strong relationship with over the years. Some options you could consider include:

  • Selling the Land to Your Tenant - By selling the land to your tenant, you can provide them a built in gift by offering the land to them at a lower price than you would charge someone else to purchase the land. In turn, you can use the money you received from selling the land to your tenant to provide an inheritance for the rest of your family.
  • Put the Land Up For Auction - Some financial professionals believe that the best way to get the most money for your land is to put it up for auction. This will help you determine the true value of the land that you own. In turn, this would provide you with more money that can be given as a gift to your tenant and as an inheritance to your family.

Deciding on the best way to provide a gift to your long lasting tenant from your estate plan is not as cut and dry as you may think. Depending on the situation, it may be better to offer the land to the tenant at a reduced rate, or to decide to put the land up for auction and distribute a gift to the tenant from the earnings of that sale. Sitting down with a financial advisor who specializes in estate planning should be your first step toward making this educated and thoroughly thought through decision.
If this article has you starting to think about your own estate, get in touch with my office at rdunn@dunncreekadvisors.com. I always enjoy meeting with people who are starting to figure out their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.