Land can be valuable to us in many ways. To an investor, the value of a parcel of land is in the profit to be made from its sale. To an owner of commercial property, the property’s value is in the rents that can be collected for its use. To some of us, the value of land is more deeply rooted. The value is in family memories and commitments, in a clearing by a brook or a forest’s rich solitude, in the goodness that our land has brought to our lives. There is a bond between people and land, a bond which can be passed on from generation to generation. However, the ownership of prime property as a family asset creates the need for careful and specialized estate planning.
Due to the dramatic increase in property values in recent years, a family of otherwise modest means may own land of considerable appraised value. Upon the death of the last parent, the heirs may face the obligation to pay state and federal estate taxes without having the financial resources to meet that obligation. Their only recourse may be to sell all or part of the land which was left to them, despite their own desires and expressed wishes of their parents. Fortunately, there are alternatives.
The Conservation Easement
By reducing the appraised value of land, the donation of a conservation easement to a Land Trust can reduce estate taxes. If the appraised value is reduced sufficiently, estate tax obligations can be avoided altogether. Since most of the appraised value of land is in its potential for development, the donation of development rights to a Land Trust leaves only the remaining value as taxable. Thus, the donation of a conservation easement can protect land in two ways.
First, it protects the conservation values of the land according to the specific restrictions contained in the conservation easement. Second, it protects the integrity of the land from the threat of sale to satisfy estate taxes. Furthermore, this protection option can reduce income and property taxes for the parents while still living.
Each conservation easement is individually written to address both the personal needs and the intentions of the donating landowner. The land protected by a conservation easement can continue to be used by the donor’s heirs as the family has been accustomed. A family farm, for example, can be used in perpetuity for the production of crops and the pasturing of livestock. The land can provide a home for the future generations of the family that has cared about its farmland.
Gift of a Remainder Interest
In some instances, a landowner may wish to donate land to a Land Trust while retaining the right to use the land until death. The act of making the donation of the land now, to take effect after death, is called the gift of a "remainder interest" and the retained right of use is called a "life estate." The important difference between a conservation easement and a remainder interest lies in the matter of ownership. While the landowner retains ownership when donating a conservation easement, ownership is relinquished upon death with the gift of a remainder interest. In this case, the family land is saved, but not for future use by family members.
The gift of a remainder interest to a Land Trust for conservation purposes enables landowners to satisfy their wishes to protect their land as well as reducing the estate tax obligation of heirs. In some instances, the combined gift of a conservation easement and with a remainder interest may best address the needs and desires of a landowner.
For More Information
There are two options available to landowners who wish to protect both their land and their estates. If these issues are important to you, gathering information is essential before taking any action. You may wish to refer to the Columbia Land Trust information sheet entitled “Protection Options” which describes other options for land protection. The Land Trust also has available for loan or purchase an excellent book written by tax attorney Stephen J. Small, Preserving Family Lands, Essential Tax Strategies for the Landowner.
After informing yourself regarding the choices available to you, it is imperative that an attorney and a tax planner guide the formalization of your protection plans with experience in estate planning.
Even if you do not choose to donate a conservation easement or a remainder interest in land which you own, you still can help the Columbia Land Trust protect land for future generations. Please consider including in your will a donation to the Columbia Land Trust, whether that donation be in money, securities, stock, commercial real estate, or other valuables. Your gift will live forever in the land that it helps to protect.
Questions and Answers About Conservation Easements
Lands We Seek To Protect: Qualifying Criteria
Protection Options: Summary Definitions of Protection Strategies
Tax Savings Generated by Gifts and Donations to a Land Trust
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Columbia Land Trust, a private, non-profit organization, was founded in 1990. We're dedicated to conserving signature landscapes and vital habitat together with the communities of the Columbia River region. Questions, comments, or concerns may be directed to info@columbialandtrust.org |
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