A conservation easement is a written agreement between a landowner and a government agency, land trust or conservation organization which places certain restrictions on how the land may be used in the future. The restrictions are designed to conserve some aspect of the land, such as limiting development, protecting the habitat of wildlife, making the land available for recreational use by the public, preserving the agriculture nature of land, etc.A conservation easement allows the owner of property to retain ownership and pass the property to his heirs while conserving the land for the benefit of future generations. For example, conservation easements may be used to preserve forests, beaches, ranches, wetlands, farms, and other types of land. Landowners have many different motivations for using conservation easements, depending on the type of property they own.One of the greatest estate planning benefits of a conservation easement is it allows a person to control how his property may be developed or used after his death. When a conservation easement is sold or granted, the easement is recorded with the title to the property in the county where the property is located. It is binding on all future purchasers, grantees, and lessees of the property. Placing a conservation easement on a property may qualify the landowner and his heirs for certain tax benefits.
Legacy Planning With Conservation Easements
For many people, one of the most important aspects of their estate plan is the legacy they leave for future generations. If you own land that is a habitat for wildlife or an endangered species, one of your objectives may be to prevent the land from being developed after your death. See legacy planning. If your property includes a forest, wetland, beach, stream, lake, etc., you may wish to place restrictions on how the land can be used in order to preserve its ecological or recreational value.You may have wondered how you can control what happens to your land after you are no longer here. In addition, you may be concerned about estate taxes or property taxes being so high that your heirs and beneficiaries will be unable to hold on to your land. One estate planning option for many landowners in this situation is called a conservation easement.
Tax Benefits of Conservation Easements
The donation of a perpetual easement or restrictive covenant on land for conservation purposes may qualify the owner for significant tax savings by lowering federal and state income taxes, federal and state estate taxes, and local property taxes. In an environment where taxes are rising and landowners are having difficulty paying the cost of holding on to large parcels, a conservation easement can ease the burden of keeping family property for your children and other heirs. For some families, a conservation easement may allow a farm or ranch to be passed down to future generations rather than having it sold or subdivided to pay inheritance taxes.
A conservation easement that is donated to a public agency or a 501c3 non-profit organization is a charitable donation that may qualify the donor for a federal income tax deduction. Many states offer state income tax credits to donors of conservation easements. Because a conservation easement may prevent the land from being developed or otherwise restrict the use of the property, a conservation easement may lower the market value of the land, thus reducing the federal and state estate taxes after the death of the owner. In addition, local property tax assessors may assess property subject to a conservation easement at a lower rate thereby lowering the owner’s property taxes.
If you want to preserve land for conservation purposes and lower your taxes, consult a tax professional and an estate planning attorney about whether a conservation easement should be part of your estate plan. See finding an attorney.For more detailed information on income, estate, and gift tax benefits, the use of trusts, and charitable contributions involving conservation easements, see
A Tax Guide to Conservation Easements by Timothy C. Lindstrom. This book is one of the few comprehensive guides available on the tax benefits of conservation easements and applicable federal tax code requirements.
More Information on Adding Conservation Easement to Estate Plan
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