Estate Planning
Land can be valuable to us in many ways. To an investor, the value of a parcel of land is in the profit to be made from its sale. But to some of us, the value of land is more deeply rooted: in family memories and commitments; in a clearing by a brook or a forest's rich solitude; in the goodness which our land has brought to our lives. There is a bond between such people and land, a bond which can be passed on from generation to generation. However, the ownership of property as a family asset creates the need for careful and specialized estate planning. Due to the dramatic increase in property values in recent years, a family of otherwise modest means may own land of considerable appraised value. Upon the death of the last surviving parent, the heirs may face the obligation to pay state and federal estate taxes without having the financial resources to meet that obligation. Their only recourse may be to sell all or part of the land which was left to them, despite their own desires and the expressed wishes of their parents. In short, the failure to plan for the future of valuable family land after death may grant control over that land to taxing agencies or others . Fortunately, there are alternatives.
The Conservation Easement
By reducing the appraised value of land, the donation of a conservation easement to a Land Trust can reduce estate taxes. If the appraised value is reduced sufficiently, estate tax obligations can be avoided altogether. Since a significant portion of the appraised value of land may be in its potential for development, the donation of development rights to a Land Trust may considerably reduce its remaining taxable value. Thus, the donation of a conservation easement can protect land in two ways. First, it protects the conservation values of the land according to the specific restrictions contained in the conservation easement. And, second, it protects the integrity of the land from the threat of sale to satisfy estate taxes. Furthermore, this protection option can reduce income and property taxes for the parents while still living. Since each conservation easement is individually written to address both the personal needs and the intentions of the donating landowner, land protected by a conservation easement can continue to be used by the donor's heirs as the family has been accustomed. A family farm, for example, can be used, in perpetuity, for the production of crops and the pasturing of livestock. And, every bit as important, it can provide a home for the future generations of the family which has cared so deeply about its farmland.
Gift of a Remainder Interest
In some instances, a landowner may wish to donate land to a Land Trust, while retaining the right to use the land until death. The act of making the donation of the land now, to take effect after death, is called the gift of a "remainder interest", and the retained right of use is called a "life estate." The important difference between a conservation easement and a remainder interest lies in the matter of ownership. While the landowner retains ownership when donating a conservation easement, ownership is relinquished upon death with the gift of a remainder interest. In this case, the family land is saved, but not for future use by family members. The gift of a remainder interest to a Land Trust for conservation purposes enables a landowner to satisfy his or her wishes to protect her land as well as reducing the estate tax obligation of her heirs. In some instances, the combined gift of a conservation easement with a remainder interest may best address the needs and desires of a landowner.
For More Information
These are two options available to a landowner who wishes to protect both their land and their estate. If these issues are important to you, gathering information is essential before taking any action. You may wish to refer to the information booklet entitled "Conservation Options: A Landowner's Guide", available from Blue Mountain Land Trust, which describes other options for land protection. The Land Trust also has available for purchase an excellent book written by tax attorney Stephen J. Small, titled Preserving Family Lands, Essential Tax Strategies for the Landowner. After informing yourself regarding the choices available to you, it is important that the formalization of your protection plans be guided by an attorney and a tax planner with experience in estate planning. If necessary, the Blue Mountain Land Trust can provide assistance in finding a qualified tax or estate planning professional. Even if you do not choose to donate a conservation easement or a remainder interest in land which you own, you still can help Blue Mountain Land Trust protect land for future generations. Please consider including in your will a donation to Blue Mountain Land Trust, whether that donation be in money, securities, stock, commercial real estate, or other valuables. Your gift will live forever in the land which it helps to protect.