What are the financial benefits of a conservation easement?
There are numerous possible financial benefits of a conservation easement and we encourage you to contact us for further details. Briefly, conservation easements may be purchased, donated, or bequeathed as part of a landowner’s will. The value of a conservation easement is determined by a qualified appraiser, and will vary considerably depending upon the terms of the agreement and local property values.
Many landowners decide to donate a portion or all of the value of a conservation easement and any value donated may be considered a charitable donation that qualifies for reductions in both income and estate taxes. At present, conservation easement donors may deduct up to 50% of their adjusted gross income and may carry that deduction forward up to 15 years. Qualifying farmers and ranchers may deduct up to 100% of their income, over the same time period.
Restricting a property’s development rights can substantially reduce inheritance taxes that otherwise may force a family to sell all or a portion of their ranch. Landowners may also be eligible for an additional inheritance tax exclusion of up to $500,000.
How are conservation easements valued?
Most conservation easements are valued according to what is called the “before and after test”. The appraiser establishes the value of the property both with and without a conservation easement, and the difference between the two is the value of the easement. The appraiser will rely on comparable sales of nearby properties, with and without conservation easements.
Can a conservation easement ever be amended or terminated?
One can amend the provisions of a conservation easement, as long as such amendments do not result in an increase in property value or other benefit to the landowner or other private party. Conservation easements can be terminated by judicial action whenever the purpose of the easement can no longer be fulfilled, and also by government through an act of condemnation as is the case with all real property.
What is meant by placing a conservation easement on a property “in perpetuity?”
“Perpetuity” simply means that a conservation easement cannot be amended or terminated unilaterally by the grantor, which is no different from any other deed or contract that runs with the land. Perpetuity is a requirement of federal tax law for an easement donation to be tax deductible.
Will a conservation easement result in the loss of my control over the management of my land?
Unlike management agreements, agricultural conservation easements put limitations only on commercial development and subdivision of the property in order to retain the land’s agricultural capacity and open character. Agricultural conservation easements support landowners’ day to day management decisions with regard to their ranching and farming activities as well as customary rural enterprise.
Can I have oil and gas development on my property if it has a conservation easement?
Yes. In fact Wyoming statute reinforces this for any easement that receives funding from the state. Conservation easements that qualify for federal income tax benefits must prohibit surface mining. If the landowner does not own the mineral rights, a letter must be obtained from a certified geologist stating the chances of mineral development are “so remote as to be negligible.” The extraction of minerals, including oil and gas, by techniques that have minimal surface disturbance may be allowed. However, such techniques cannot have a significant negative impact on the natural and productive values of the property.
Do conservation easements require public access?
Decisions regarding public access to the property are up to the landowner.
Who gets the money when a conservation easement property is sold?
The landowner gets all the money from the future sale of lands upon which there is a conservation easement. The only exception would be sales that involve the termination of the easement. Typically, this would only occur when the land is being expropriated by the government for public purposes. In such a case, proceeds from the sale of the land would be divided between the land trust and the landowner according to the proportion of the total value of the land that the easement represents. This value is determined by a qualified appraiser.
Can a land trust sell the conservation easement I have granted to them, or otherwise dispose of it?
Although conservation easements are considered both a contract and a property interest, a conservation easement does not give the organization holding the easement the right or ability to sell or dispose of the easement for financial gain unless specifically allowed in the agreement. Rather, it only gives the organization holding the easement the authority to restrict the use of the land as specified. Most conservation easements contain provisions that they cannot be transferred to other organizations without the mutual consent of both the easement holder and the landowner.
What happens if the Land Trust goes defunct?
Conservation easement deeds typically contain provisions for transferring the easement to another like-minded nonprofit organization, should the holder of the conservation easement cease to exist.
What about the mortgage on my property?
When a conservation easement is recorded, any mortgage on the land must be subordinated to the easement. This allows the conservation easement to remain intact if the property is ever in foreclosure. Otherwise, in the event of foreclosure the mortgage would receive priority and the easement may be ruled invalid. When considering a conservation easement, one should confirm that the lender is willing to subordinate the mortgage and also that any reduction in the market value of the property would not fall below the mortgage amount.
Will a conservation easement prevent me from using my property as collateral for a loan or mortgage?
No. However, the amount of the loan will reflect the reappraised value of the property.
Can there be title insurance on a property that has a conservation easement in place?
Will conservation easements hamper economic development in my community?
Current growth patterns across North America and the West show that people are choosing to locate and remain in areas that have high natural amenities such as scenic vista, abundant recreational opportunities, clean air, clean water, and wildlife. Open spaces conserved through conservation easements maintain these features and preserve the quality of life that attract businesses and people to the region.