OPTIONS FOR PRIVATE LANDOWNERS
This section is intended to provide an overview of the most common techniques
for voluntary land protection. It should not be used as the only
reference in making a decision. Landowners are encouraged to seek guidance
from a tax attorney or accountant in order to determine the most suitable
option. The Wellfleet Conservation Trust can identify attorneys,
surveyors, appraisers, accountants, and land planners familiar with local
GIFTS OF LAND
Outright Donation (Fee Simple Transfer)
About 90 percent of the properties preserved on Cape Cod were donated to
a local land trust or town conservation commission. About 50 parcels per
year are donated outright in this manner. Typically, the only cost to the
land donor is for an appraisal, which certifies the value of the donated
land for federal income tax deductions. Appraisals are needed when the
claimed value of the deduction is more than $5,000. Land trusts usually
ask donors to pay remaining property taxes on the land before it becomes
tax exempt in the next fiscal year.
Giving the land to a nonprofit conservation organization or to a government
agency is the simplest way to protect land. It is only necessary to obtain
acceptance from the agency or organization to which the land will be
donated, prior to deeding the land. A gift insures long-term protection
of the land. The donor receives tax benefits in the form of federal income
tax deductions, potential estate tax benefits, and relief from property
taxes. The donor is relieved of management responsibilities, and automatically
absolved of liability associated with any trail use.
Donation by Will (Bequest
A gift of land made through a will entitles the donor to retain full
use of the land during his or her lifetime and assures that it will
be cared for in the future. It is advisable to discuss the gift with
the agency or organization prior to inclusion in a will, to insure
a plan for the care of the land. The donor is responsible for real
estate and income taxes for the property during his or her lifetime.
But removing the land from an estate will reduce inheritance taxes.
Donation with a Reserved Life Estate
A donation with a reserved life estate may be made
to a government agency or conservation organization. The donor retains
the use of the land during his or her lifetime, and the lifetimes of
specified family members. A reserved life estate insures that the land
is protected in perpetuity, yet allows the donor to reside on it and
maintain the land. The tax advantages with a retained life estate are
less that those with an outright donation.
SALE OF LAND
For a landowner interested in conservation who cannot donate land directly,
a bargain sale of property to a land trust insures the land will be protected.
With this option, the land trust purchases land at less than full-market
value. The benefit to the landowner is twofold:
1. the sale produces needed income and,
2. he/she can claim the difference between the sale and full-market value
as a tax-deductible donation.
More intangible but equally important, landowners can be assured that
valuable land and water resources will be protected.
Sale at Fair Market Value
Sale at fair market value is the sale of property at the price a knowledgeable
buyer would pay for the land. Most conservation organizations are not
able to purchase land at full value due to insufficient funds. If the
land is sold at full value and has appreciated in value since its purchase,
the seller will be liable for income tax on the capital gain. This can
affect the net profit from the sale. There are no charitable deductions
associated with a sale at full value.
a Conservation Restriction
A conservation restriction (or CR) is a voluntary, legal agreement
between a landowner and a land trust, such as the Wellfleet Conservation
Trust, or a government agency, that limits a property's uses in order
to protect its conservation values.
When you own land, you also hold many rights associated with it, such as the
right to build structures. When you create a conservation restriction, you agree
to modify or give up some of those rights. For example, you might give up the
right to build more houses, while retaining the right to keep a view open or
create gardens. Future owners also will be bound by the terms of the agreement.
In exchange for giving up the right to develop the land, the assessed value of
the property is typically greatly reduced, substantially cutting down on the
property tax due on the land every year. Also, a charitable deduction is available
for taax purposes the year that the CR is donated. The conservation restriction
is a very flexible tool, and can be an exceedingly useful tool in estate planning.
The conservation restriction (called a "conservation easement" in some
states) is drafted in a way to protect critical open space resources and meet
the financial and personal needs of the landowner. In some cases, a conservation
restriction may apply to just a portion of the property, leaving the option of
development open for the remaining part. Most restrictions are intended to be
The holder of the restriction takes on the responsibility and legal right to
enforce the agreement. If a future owner or someone else violates the agreement
(perhaps by erecting a building the restriction doesn't allow) the holder will
work to correct the violation.Owners of highly valued property may also use
the restriction to lower the value of their estate for estate tax (or inheritance
tax) planning. The combined federal and state estate tax can be as high as 55%,
sometimes forcing children to sell the property simply to pay off the "death
taxes". A conservation restriction can lower the estate tax, and perhaps
provide the way for heirs to retain title to a cherished family asset. Estate
planning with the aid of professional advisors is critical
Sale of a Conservation Restriction
A conservation restriction is also sometimes sold by the landowner
to the acquiring entity. All of the above comments regarding a donated
CR still hold, with the exception that no charitable tax deduction is
available, unless it is a bargain sale of the CR.