PLANNING TODAY - GREENING TOMORROW
PLAN FOR THE FUTURE OF YOUR LAND
What will happen to it in the future? Can my family afford to keep it? Will the next owner cherish it as I did?
You can take action to ensure that it will never be lost to a strip mall or a mc-mansion subdivision. Preservation ensures that your land will be cared for and cherished by future generations to love and appreciate it as you do.
The decision to preserve your land requires careful consideration of the special features of your land, your goals, your financial situation and the needs of your family.
Land Preservation allows people to protect the land they love and provide public benefits, such as water quality, farmland preservation, scenic views, wildlife habitat, outdoor recreation, education, and historic preservation.
Questions to ask yourself when considering preservation
- Do you want to continue to own your land or pass it on to a family member?
- Do you want to continue to live on your land?
- Are you interested in donating your land?
- What is it about your land that is important to you?
- Does the entire parcel need to be preserved in order to maintain the property’s unique values?
- Do you need the future flexibility to build on the land?
- Are you concerned about future estate taxes or present income taxes?
- Do you need to receive financial compensation to accomplish your goals?
- How much of your lands value is due to appreciation during your ownership?
A legal agreement that permanently limits uses of the land in order to protect specific conservation values and prohibit certain activities that would harm those values.
As a landowner, you own a bundle of rights associated with your land. This bundle includes the right to own, subdivide, develop, grow crops, harvest timber, use and enjoy, exclude others, lease it, transfer ownership, etc. When you place a conservation easement on your land, you
permanently give up some of those rights – in most cases the right to subdivide and develop – while retaining the remainder. Each easement is unique, and the terms are negotiated to ensure the conservation easement meets your goals for your land and protects its qualities. Future
owners are also bound by these terms.
Most conservation easements are donated. A donation can provide significant tax benefits. Restricting your lands development potential lowers its market value. This reduction can significantly reduce income, estate and inheritance taxes. conservation easement is that it
helps you pass on your land to the next generation.This can make a critical difference in an heirs’ ability to inherit the land intact.
If your land has very significant conservation values, there may be funds available to purchase an easement. if an easement is sold, your profit is taxed by the IRS.
Donating land for conservation is one of the finest legacies you can leave for future generations. This option may be attractive to landowners who:
- Own land with significant conservation values and who do not have heirs who will protect those values
- Own property that they no longer use
- Own highly appreciated property and the sale of which would result in high capital gains taxes
- Have substantial real estate holdings and wish to reduce estate tax burdens
- No longer want to be responsible for managing land they own, but still want to treasure and enjoy it
A donation of your land provides several benefits. It releases you from the responsibility of managing the land while providing a substantial income tax deduction and estate tax benefits. It will also be permanently conserved.
Donating Land or Easements by Will
Some landowners prefer to continue to own and control their land during their lifetime, but still wish to see their land preserved and cared for after their passing. This can be accomplished by leaving your land or an easement to MCF in your will. Removing the land from your estate reduces estate and inheritance taxes.
If you wish to continue to live on your land you can donate or sell your property and reserve the right to continue to live on the property through your lifetime. With a life estate you can continue to enjoy your land while gaining assurance that your land will be preserved forever.
Selling Land at Fair Market Value
Selling your land for preservation may seem like an obvious way to preserve it. Unfortunately, land trusts have limited funds available for land purchases and when able to purchase at fair market value, it is for land with significant conservation values.
A fair market value sale is often not as advantageous to a landowner as it may seem. Capital gains taxes and selling costs can often substantially reduce profits from the sale, particularly for those who are in a high tax bracket and those who are selling highly appreciated property.
An alternative to fair market value sale is a bargain sale where the land is sold at less than fair market value. A bargain sale gives the landowner the benefit of income while still offering the tax-reducing benefit of a donation. The difference between the land’s appraised value and
its sale price is the donation amount that can be claimed as a tax deduction.
With an installment purchase, the landowner agrees to accept a series of payments over time as opposed to one lump sum payment. This gives both the landowner and the land trust the advantage of spreading the income out over a number of years.
Option to Purchase
If a landowner is interested in selling their land, and the land trust does not have the funds to purchase it immediately, an option agreement can be used. This agreement would give the land trust a specified amount of time to exercise the option to purchase the land. During this period, the land cannot be sold to any other buyer.
Right of First Refusal
If a landowner is not ready to sell their land a right of first refusal can be granted to a land trust. When the landowner decides to sell their land, the owner must offer the land to the land trust before selling to a third party.