Champlain Area Trails – Conservation Easement FAQ Sheet
- What is a Conservation Easement?
A Conservation Easement is a legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land in order to protect its conservation values. It allows the landowner to continue to own and use the land and to sell it or pass it on to his heirs.
When you donate a Conservation Easement to a land trust, you give up some of the rights associated with the land. For example, you might give up the right to build additional structures or to subdivide the property into multiple parcels. You do retain rights like using the land for agriculture or harvesting timber but such activities shall be implemented in ways that protect clean water, maintain soil health, and ensure sustainable use. Future owners also will be bound by the easement’s terms. The land trust is responsible for making sure the easement’s terms are followed.
Conservation Easements provide for flexibility within established limits. An easement on property with rare plants might prohibit development in sensitive areas but allow it in other places. An agricultural easement would allow farming and new barns but not too close to water bodies. An easement may apply to just a portion of the property or not in areas where buildings already exist.
A landowner can sell a Conservation Easement, but usually easements are donated. If the donation benefits the public by permanently protecting important conservation resources while meeting federal tax code requirements it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land’s value with the easement and its value without the easement. Placing an easement on your property in New York qualifies you and subsequent owners with a tax credit on your state income taxes of 25% of the total property taxes apportioned to the land.
A Conservation Easement can be useful for passing land on to the next generation. By removing the land’s development potential, the easement lowers its market value, which in turn lowers applicable estate tax. Whether the easement is donated during life or by will, it can make a critical difference in the heirs’ ability to keep the land intact.
- What are the tax benefits of a Conservation Easement?*
(*Note: This is for general information only. You should consult your legal and financial advisors regarding the specifics of your situation.)
- Income Tax Benefits:
Under the Internal Revenue Code, qualified Conservation Easement donations may be treated as charitable gifts for federal income tax purposes. The value of the gift can then be deducted at an amount up to 50% of the donor’s adjusted gross income (AGI) in the year of the gift. If the easement value exceeds 50% of the donor’s income, the excess can be carried forward and deducted (subject to the 50% limit) for a total of fifteen years.
Example: The value of the Smiths’ easement, as figured above, is $450,000. If their AGI in the year of the donation is $60,000, they would be able to deduct $30,000 (50% of $60,000) in the first year. Since the value of the easement is greater than their allowable deduction, the Smiths would also be able to deduct $30,000 in each of the next fourteen years (assuming their income stays the same) in order to claim the full amount of the easement donation.
2. Estate Tax Benefits:
In addition to income and real estate tax benefits, there can be savings on inheritance taxes after giving a Conservation Easement. A Conservation Easement almost always reduces the value of an estate for tax purposes, thus lowering and sometimes eliminating the tax. A Conservation Easement is a great way, and often the simplest and most efficient way, for parents to pass property down to their children.
- Can a Conservation Easement be tailored to my needs and desires?
Yes, and that is one of the most attractive features of Conservation Easements. Landowners and land trusts, working together, adapt Conservation Easements to reflect both the landowner’s desires and the need to protect conservation values. An easement restricts development to the degree that is necessary to protect the significant conservation values of that particular property. Sometimes this totally prohibits construction, and sometimes it does not. Even the most restrictive easements typically permit landowners to continue such traditional uses of the land as farming and forest management. Since each Conservation Easement is tailored to meet the conservation and financial/tax planning needs of the landowner, few Conservation Easements are identical because properties differ and landowners may want differing provisions. We write our Conservation Easements by meeting with each landowner numerous times and drafting and redrafting the document until all parties are satisfied.
- What activities are allowed on land protected by an easement?
The activities allowed by a Conservation Easement depend on the landowner’s wishes, the characteristics of the property, and the interests of the land trust. In some instances, no further development is allowed on the land. In other circumstances some additional development is allowed, but the amount and type of development is less than would otherwise be allowed. Conservation Easements may be designed to cover all or only a portion of a property. Every easement is unique because it is tailored to the property and to the landowner and land trust’s goals for the land.
- Can the landowner still sell or give the property away?
The landowner continues to own the property after executing an easement. Therefore, the owner can sell, give or lease the property. All future owners assume ownership of the property subject to the conditions of the easement.
- Does the public have a right of access to easement-protected property?
The Conservation Easement does necessarily grant the public access to property. As an organization that “saves land and makes trails,” Champlain Area Trails would want the ability to have a trail but we would balance that with the characteristics of the property, its location within any existing or planned trail network, and the interests of the landowner.
- How long does an easement last and who upholds it in the future?
To be eligible for a federal income tax deduction the easement must be “perpetual;” that is, it must last forever. The land trust monitors the property, generally once a year, to assure that the terms of the easement are followed. If terms of the easement have been breached, the land trust works with the landowner to uphold the easement. In the worst case scenario, the land trust will take legal action to address alleged violations of the easement. Because of the obligation to enforce the easement, the land trust asks all easement donors to make a financial contribution to the Land Trust’s Stewardship Fund to support the long-term monitoring and enforcement of this and other easements the land trust holds.
- Who owns and manages easement protected land?
The landowner retains full rights to control and manage his/her property within the limits of the easement. The landowner continues to bear all costs and liabilities related to ownership and maintenance of the property. The land trust monitors the property to ensure compliance with the easement’s terms, but it has no other management responsibilities and exercises no direct control over other activities on the land except trail management on properties with trails.
- Does the easement have to cover all of the landowner’s property?
No, some easements only cover a portion of the landowner’s property. Again, it depends on the landowner’s wishes. For example, if someone owns 100 acres, of which 65 acres are an old-growth forest, the landowner may decide to restrict development only on those 65 acres. The remaining 35 acres would not be covered or affected by the easement.
- What kind of land can be protected by Conservation Easements?
IRS regulations require that the property have “significant” conservation values. These include forests, wetlands, important species habitat, beaches, scenic areas, and more. The land trust also has its own criteria for accepting easements. For all potential Conservation Easements, the land trust evaluates the property to determine whether it meets these and land trust’s own criteria.
- How much does it cost to create an easement?
There will be legal costs and closing costs. You must pay an appraiser to establish the value of the conservation easement if you will file for tax benefits of the donated easement. You may also need to have your property surveyed if you do not have a current survey. These costs may be tax-deductible. The land trust will need funds to ensure that the easement will be monitored in perpetuity and may request a stewardship gift to cover that and other transaction costs. Such a gift is a charitable contribution with attendant tax benefits.
- How long does a Conservation Easement last?
Conservation easements “run with the land,” binding the original donor and all subsequent owners to the easement’s restrictions. Only gifts of perpetual easements can qualify for income, estate, and property tax benefits. The easement is recorded at the county clerk’s office so that all future owners and lenders learn about the restrictions when they obtain title reports.
- What are the land trust’s responsibilities regarding Conservation Easements?
The land trust is responsible for enforcing the restrictions articulated in the Conservation Easement. Therefore, the land trust monitors the property on a regular basis—typically once a year—to determine that the property remains in the condition prescribed by the easement document. The land trust maintains written records of these monitoring visits, which also provides for consistent communication between the land trust and the landowner.