Rising Seas, Shifting Assets: How Climate Change Is Transforming Coastal Estate Planning Strategies

As climate change continues to reshape our coastlines, property owners and their families face unprecedented challenges in protecting and preserving coastal assets for future generations. More than $1 trillion worth of property is located within 700 feet of the coast, with these properties’ proximity to water bodies putting them at risk of extreme weather events, hurricanes, sea level rise, and high tide flooding. For estate planning professionals and property owners alike, this reality demands a fundamental shift in how we approach wealth preservation and intergenerational asset transfer.

The Growing Financial Impact of Climate Risks

The financial implications of climate change on coastal properties are becoming increasingly evident. A climate risk assessment by the Risky Business Project estimated that between $66 billion and $160 billion worth of real estate in the United States will be below sea level by 2050, increasing to between $238 billion and $507 billion by 2100. These staggering figures represent not just individual property losses, but potential devastation to family wealth built over generations.

Recent research has found that exposed properties have already experienced declines in transaction prices, at 9 to 14%, attributed to expectations of exposure to chronic inundation. This trend is accelerating as buyers become more climate-conscious and sophisticated about long-term risks. The most vulnerable properties — those that stand to be flooded after seas rise by just one foot — were selling at a 14.7 percent discount.

Estate Planning Challenges in the Climate Era

Traditional estate planning strategies must evolve to address climate-related risks. Estate planning lawyers should consider the impact of climate change and analyze whether a client has property or other interests that may be impacted by climate-related risks. As with a trustee, an estate planning lawyer is not tasked with being able to predict the future and a crystal ball is not required, but common sense consideration should be given in all circumstances.

The complexity extends beyond simple property valuation. A trustee who holds property in a coastal area experiencing increased erosion, sea-level rise, and/or a heightened threat of extreme storms, should consider what steps can and should be taken to protect the best interests of the trust and its beneficiaries. This fiduciary responsibility now includes climate risk assessment as a standard component of prudent asset management.

Strategic Approaches for Coastal Property Protection

Forward-thinking property owners are implementing several strategies to protect their coastal assets:

• Climate Risk Assessment: Map the risk of sea level rising, exposure/vulnerability to water, and costs of mitigation and repair. You’ll have to pay special attention to this info when projecting the sale price and land value.
• Insurance Optimization: While the cost of insuring coastal properties hasn’t skyrocketed and still costs more to insure coastal homes, many require additional policies, but these prices haven’t spiked, property owners must stay vigilant about coverage gaps and evolving risk assessments.
• Resilient Infrastructure Investment: There is a growing trend towards investing in properties that incorporate climate resilience into their design. Features such as elevated structures, sustainable materials, and energy-efficient systems are becoming more prevalent and desirable. These features not only offer protection against climate-related events but also promise lower long-term maintenance and insurance costs.

Trust Administration and Fiduciary Duties

Trustees managing coastal properties face evolving responsibilities. Just like a prudent investor must keep apprised of economic and market conditions, a competent trustee holding property that is subject to foreseeable climate risks should keep themselves informed about climate trends, data, and forecasts in order to be well positioned to identify and protect against such risks.

Different beneficiaries may have more awareness or interest in climate change and related risks than others, and they may also have plans that impact a trustee’s considerations about whether to continue holding property that is subject to climate change or consider other options better suited to the interests and plans of future generations.

The Long Island Context

For families with coastal properties on Long Island and similar vulnerable areas, working with an experienced estate planning lawyer who understands both traditional estate planning principles and emerging climate considerations is crucial. Experienced lawyers take pride in focusing on each client’s individual needs and taking the time to understand those specific needs. This personalized approach becomes even more critical when addressing the complex intersection of climate risk and wealth preservation.

The legal services provided are not only important – they impact the lives of clients and their loved ones. That’s why professionalism must be carefully combined with the empathy and compassion clients deserve. This philosophy is particularly relevant when helping families navigate the emotional and financial challenges of potentially losing or significantly modifying cherished coastal properties.

Innovative Estate Planning Tools

Several estate planning tools are gaining prominence in climate-conscious planning:

• Conservation Easements: Conservation easements are unique tax and estate planning tools, particularly for clients who own land they intend to preserve for future generations. These easements offer significant income and estate tax benefits, along with the possibility of property tax savings.
• Dynamic Trust Structures: Trusts with built-in flexibility allow trustees to respond to changing environmental conditions while maintaining fiduciary obligations.
• Insurance Trusts: Specialized structures can help manage the increasing insurance costs and coverage requirements for climate-vulnerable properties.

Looking Forward: Adaptation and Resilience

As the consequences of climate change become more certain and less distant into the future, the impact on real estate markets will accelerate. The future consequences of climate change represent an enormous financial loss to real estate markets and a reorientation of how coastal property is developed and managed.

Successful estate planning in the climate era requires a balanced approach that acknowledges both risks and opportunities. The challenge lies in balancing economic considerations with environmental awareness, ensuring that investments are not only financially sound but also resilient to the changing climate. Navigating the complexities of coastal real estate in the era of climate change requires a comprehensive understanding of the market, foresight, and a willingness to adapt strategies as conditions change.

For coastal property owners, the time for proactive planning is now. Responsible, thoughtful trustees and estate planning attorneys should keep these considerations in mind as they endeavor to protect and preserve assets for current and future generations. By working with knowledgeable professionals who understand both the legal complexities of estate planning and the realities of climate change, families can develop strategies that protect their wealth while adapting to our changing world.

The intersection of climate change and estate planning represents one of the most significant challenges facing coastal property owners today. However, with proper planning, innovative strategies, and expert guidance, families can navigate these turbulent waters while preserving their legacy for generations to come.