Many people choose to leave property to their loved ones or favorite charitable causes. But what starts as a kindly act can go terribly wrong if the land turns out to be contaminated. Unfortunately, estate plans involving environmentally contaminated property happen more than you might think. In many cases, the individual or couple gifting the property may not even aware the land is contaminated or is in violation of environmental regulations.
Some now refer to this type of inheritance as “toxic succession,” or the passing on of contaminated property that ends up costing the new owner more than it’s worth. This can happen if the property used to be an auto shop, a Laundromat or even a farm. Many businesses can leave contamination behind, even if they have not been operating for years.
That is why it is important to take a few precautionary steps when gifting or bequeathing property if contamination is a possibility.
Have property tested
It is important to have the property tested before creating the estate plan. A certified environmental engineer can test for contamination. Testing can determine whether a significant enough level of contaminants exist to trigger a cleanup. If so, you can assess how thoroughly the property is contaminated and the potential cost of remediation.
Also, the report could indicate that pollutants may affect neighboring properties. The individual or charity you leave the property to could be on the hook for additional cleanups as well as damages if neighbors sue.
What are your options?
Once you understand the potential cost involved in righting the property, it may be worth your while to put it on the market as is, with full disclosure. Farms are excellent examples of contaminated properties that may still be marketable. Farmers often understand how pesticides compromise land. However, if a working farm still makes money, picking up the land at a discount may be worth it to a farmer.
While you may have tax and other financial consequences associated with selling contaminated property, it may be worth it in order to gift a known amount of assets. Simply leaving the property as is may ultimately be less helpful than taking the tax hit. Of course, individual circumstances will vary, and other options exist, so it is vital to speak to an experienced estate planning attorney to discuss your situation before taking any action.