It’s really too bad. The relationships among family members may have been very loving and congenial. The estate plan may have been developed with the greatest care and fairness towards all heirs. But, when property passed on from one generation to the next turns out to be contaminated, that may well “poison” the entire inheritance process.
“The problem’s root,” explains Ingrid Case in Financial Planning, “is the federal Superfund law that makes current and past owners and operators jointly and individually liable for contamination.” If there’s contamination on a property and it’s a hazardous substance, the current owner is responsible for cleaning it up.
Years ago, for example, Mr. and Mrs. Smith may have bought a property to use in their business. Unbeknownst to them, the property once held a gas station. Now, that same property has been passed down to their son John. Unfortunately, the old underground tanks are leaking, causing contamination, not only on John’s property, but on neighboring land as well.
John didn’t cause the problem, but as current owner, he’s responsible for the cleanup. John might even face lawsuits from neighbors for cleanup costs, health problems, and diminished property values.
Financial Planning quotes Kevin J. Daehnke, an attorney in Newport Beach, Florida, who is spearheading a campaign to raise awareness of the problem of toxic inheritances. With property passing haphazardly from generation to generation, Dehnke warns, that not only leaves heirs holding the bag for unanticipated cleanup costs, but might also leave financial service providers liable.
At Geyer & Associates, we believe a well-crafted estate plan should provide for your loved ones in an effective and efficient manner, minimizing headaches and delays. For that very reason, when we’re discussing passing land or real estate property to heirs, one important consideration is making sure the property is not contaminated, and if it is, investigating to what extent.
Sometimes, the property has already passed to the next generation and it’s the heir asking for our help. Since the services Geyer & Associates provide include advising clients regarding the valuation and taxation of property interests, dealing with possible contamination issues is part of handling the estate.
How can owners (both clients creating an estate plan and then the heirs themselves) “vet” their property for possible contamination? Investigate the property’s history: Was it ever home to a dry cleaner, junk yard, auto shop, gas station, oil well, or mine? Are there chemical odors? Old machinery? If some of these “red flags” are present, environmental contamination remediation experts might need to be called in.
“An owner who is unsure whether a property is contaminated or how much it might cost to clean up may want to segregate the assets from the rest of the estate,” Daehnke says. Then, from the heirs’ point of view, he adds, “You can always disclaim things that someone has willed to you.”
by Ronnie of the Rebecca W. Geyer blog team