A conservation easement is an excellent tool for permanently protecting land while letting the landowner retain ownership. The easement is a legally-binding agreement between a landowner and government agency such as a township or a qualified conservation organization such as a land trust. The easement permanently limits a property’s use and binds all present and future owners of the land.
A conservation easement reduces the market value of the land because the owner gives up the potential for full development. Easements are most often donated by the landowner and the donation may result in a charitable deduction for federal income tax purposes. Sometimes, though, easements are purchased by a local or county open space program or land trusts. In either case, the conservation easement may also reduce estate taxes—because the land will be valued at less than fair market value upon the owner’s death—and, depending on local laws, lower property taxes. Indeed, without these reductions in estate and property taxes, the landowner’s heirs may not be able to afford to keep the land in the family.
Donating an Easement
When a landowner donates an easement, he or she may be eligible for a charitable deduction equal to the amount of reduction in the land’s value. A qualified appraiser determines the amount of the reduction.
Selling an Easement
A landowner may also sell an easement to a government agency or qualified non-profit. This produces no charitable deduction if the easement is sold for its full value and may give rise to federal income tax obligations for either capital gains or ordinary income tax.
Donating an Easement Via a Will or Living Trust
An easement may be donated to either a government agency or qualified conservation organization by will or living trust. Such a bequest would generate a charitable deduction for the estate of the person making the bequest.
Monitoring the Easement/Costs of Recording the Easement
Once a qualified agency or organization holds the conservation easement, it is obligated to monitor the land on a regular basis to ensure that the easement is being upheld and to enforce it if it is violated. The ongoing cost of monitoring is frequently covered by establishing an endowment.
There are other costs involved in creating and implementing a conservation easement. A conservation planner must assess the property so that important natural features can be identified (this process is called a baseline study). Then, the easement must be written and recorded.
