Preserving Legacy with Conservation Easements

The author of this article, Shane Boyer, is a Real Estate Consultant and Sales Agent at Forest Resource Consultants. His experience is focused in timberland transactions, conservation easements, forest management, and timber procurement.

Land preservation for future generations is as important today as it ever has been. Private landowners understand how nature attributes to their family’s quality of life. For this reason, the legacy of their land holdings is often of supreme importance. This creates some difficult decisions when more intensive land use opportunities emerge. On one hand, developing privately owned land might provide increased financial returns for the family. On the other hand, permanently conserving the property provides certainty it will continue to protect wildlife habitat, improve water quality and safeguard natural resources.

In the previous newsletter article, The Challenges of Managing a Family Forest Business in Transition, Andy Stone, FRC’s Director of Family Business Services, wrote: “A successful transition requires developing a plan between the present and future generation of owners that establishes a common vision for the business as well as a mission statement to guide future decisions.“ A conservation easement is a tool that ensures a property will remain in timber or agricultural production for the enjoyment of future generations.

A conservation easement is a voluntary, legal agreement that limits the future change in use, modification, or development of land in perpetuity. When establishing a conservation easement, a landowner is voluntarily giving up the opportunity to benefit from any income streams produced by a change in use. Congress recognized the need to incentivize private land conservation and compensate landowners for their loss of future income.  Therefore, landowners can claim a tax deduction as compensation for the donation of the easement to a qualified land trust.

Often, land has value derived from sources other than its present use. Farmland or timberland with the development potential is an example. In order to qualify for placement of an easement, a property must have an established and definable conservation purpose. Additionally, the individual wishing to place the easement must own a fee-simple interest in the property for at least one year prior to establishing the easement.

A property’s market value is reduced when placed in a conservation easement. The market value of the property before as well as after the establishment of an easement is determined with a qualified appraisal. The difference between these two estimates is the value of the conservation easement and the qualified charitable tax deduction available to the taxpayer. Congress made this enhanced tax benefit permanent in December of 2015 which has further incentivized landowners and has driven greater private funding of conservation.

Steps Required to Establish a Conservation Easement:

  • Own the property in fee-simple for at least one year prior to establishing the easement.
  • Identify a land trust that will qualify the property and complete a baseline study documenting the property’s conservation values and biodiversity.
  • Hire an attorney to draft a deed of conservation easement and other legal instruments to ensure the property is property donated and protected from development in perpetuity.
  • Engage a qualified appraiser to conduct an appraisal of the property to determine the appropriate value of the conservation easement and the amount of the charitable donation.

 

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Whether exploring a new timberland acquisition or considering the establishment of a conservation easement, we can help you evaluate the critical decisions that lead to a successful experience. Contact us to discuss how we can help.

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