Conserving Your Land

A conservation easment under Washington State law is a “real property interest” but it is not a possessory interest. Ownership of the land stays with the landowner. It allows landowners to continue to own and use their land. They may be able to build a home or farm on their land etc. The owners can also sell the land or pass it on to heirs. The land trust does not have any right to direct, manage, control or supervise the use and activities of the owner. Those rights stay with the landowner. Instead, when a land trust accepts a conservation easement on the landowner’s property, the land trust becomes responsible for enforcing the restrictions the landowner is agreeing to within that easement document. To enforce the terms of the easement, the land trust must monitor the eased property on at least an annual basis by visiting the property. If the land trust learns that the terms of the conservation easement have been violated, the land trust has a duty to require the owner to correct the violation.

The limits of the conservation easement ‘runs with the land,’ meaning that even if the land is inherited or sold the restrictions stay in place. Donated conservation easements may entitle you to a charitable income tax deduction based on the difference between the land’s fair market value and its value after a conservation easement is on the land. A conservation easement is a recorded, legal agreement.

Conservation easements range from restrictions limiting residential or commercial use of the land to those that state the land will remain forever wild. The title stays in the landowner’s name and the land may be used as before, leased, sold, or passed along to the landowner’s heirs; always, however subject to the restrictions of the easement.

Most conservation easements are voluntary donations and benefit the public by protecting valuable land, thus the value of the restrictions may be considered a charitable gift.

Those who describe property rights often use the example of a landowner possessing a bundle of sticks, each stick representing a property right held by the owner of the property. Without a conservation easement, a landowner may have the right to construct buildings, subdivide their property, build commercial facilities on it etc. When a landowner enters into a conservation easement, they relinquish some of these rights, or sticks, from their bundle of rights, such as the right to build additional buildings in a floodplain or shoreline area, or the right to build trails or roads through a wetland. Because each landowner negotiates different restrictions for his or her property, and each piece of property is distinct from another, each conservation easement is a unique document, drafted to fit the particular property and the interests of its owner.

The specific rights, or sticks, a landowner relinquishes are described in detail within the conservation easement document itself. The promises made by the landowner in the conservation easement run with the land to bind future landowners. Section 170(h) of the Internal Revenue Code provides the framework for the deductibility of charitable contributions of conservation easements by allowing an income tax deduction for a “qualified conservation contribution.” The term “qualified conservation contribution” is defined in § 170(h)(1) as a contribution that is a “qualified real property interest” granted to a “qualified organization” that is exclusively for conservation purposes.

A variety of organizations hold conservation easements aside from land trusts, including local entities such as towns, conservation commissions, state wildlife agencies, watershed associations, etc.

The land trust does not own the land under a conservation easement; however, the long-term role of the Trust is to assume the responsibility and legal right, through its Stewardship Fund, to enforce the terms of the agreement forever. The Trust usually asks for a tax-deductible contribution from the easement donor to offset the cost of future stewardship expenses. The property remains in private ownership, and within the conditions of the easement can be otherwise used as before, leased, sold, or passed on to heirs.
An easement does not grant public access to a property unless so desired by the owner. The Land Trust Alliance website has more information about land conservation options.

Contact Skagit Land Trust conservation staff to inquire about protecting your land with a conservation easement.

 Land donations of a certain size may confer conservation area naming opportunities. At times we may mutually decide that it is best for you to retain ownership of part of the land and the land trust to own another part.

Donating land for conservation purposes may be the best conservation strategy in several circumstances, for example: you desire this land to be part of your family’s legacy; you are concerned with passing the land on to heirs; you own property you no longer use; you own highly appreciated property the sale of which would result in large capital gains taxes; you wish to reduce estate tax, income tax, or property tax burdens; or would like to support the land trust by gifting property for resale to a conservation buyer. Donations and below market sales may be

The full market value of land donated to a nonprofit land trust may be tax deductible as a charitable gift to the fullest extent allowed by law. In a bargain sale, you sell your land to the land trust for less than its fair market value. This not only makes it more affordable for the land trust, but offers several benefits to you: it provides cash, avoids some capital gains tax, and may entitle you to a charitable income tax deduction based on the difference between the land’s fair market value and its sale price.

Bargain Sale – Why Sell for Less Than Market Value?

Obviously, a sale at market value realizes full price for the owner. However, the seller is typically liable for income taxes and capital gains taxes. In contrast, an outright donation or bargain sale of property to Skagit Land Trust can yield substantial income tax deductions and estate tax benefits for the donor or seller, while contributing to your environmental legacy. Below market sales of land are attractive to many people because they combine the income-producing benefits of a sale with the tax-reducing benefits of a donation.

If the land has appreciated a great deal since you acquired it, an outright donation or below market (“bargain sale” for less than market value) may not be as big a financial sacrifice as you might expect. In fact, both bargain sales and donations can have substantial financial benefits.

Donation by Will (Bequest)

Making a bequest of land can have a lasting impact on the beauty and character of a place you hold dear. In a bequest, a landowner continues to own and use their land during their lifetime and transfers ownership rights after death to a land trust. Some landowners have used their wills or revocable trusts to place a conservation easement on land upon their death, with the land then passed onto heirs. Ask your legal or financial consultant other methods, such as Donations that Establish a Life Income, Charitable Gift Annuity, Charitable Remainder Unitrust or a Charitable Lead Trust. Many bequest instruments have beneficial tax implications for a person’s estate.

Donation with a Reserved Life Estate
This is an agreement allowing a landowner to donate a property during their lifetime while reserving the right to continue to live on and use the property. Reservation of the interest allows the owner to retain ownership for a period of time measured by the life of one or more individuals, by a term of years, or by a combination of the two. It is an excellent solution when a landowner wants to continue using their land, but is concerned with issues that may arise when they are gone or incapacitated (such as the threat of a forced sale). When you die (or sooner if you choose), the land trust gains full title and control over the property for conservation. Because both the present owner and future owner have a vested interest in the land, they can, by agreement, set standards for conservation of natural and scenic resources within the property. By donating a remainder interest, you may be eligible for an income tax deduction when the gift is made. The tax deduction is based on the fair market value of the donated property less the expected value of the reserved life estate.

Washington Transfer on Death Deed

Real estate owners in Washington have another estate planning option: the transfer on death deed (TODD). Find the full text in the Revised Statutes of Washington at Chapter 64.80. This statute is based on the Uniform Real Property Transfer on Death Act (URPTODA). The new law allows landowners to direct the distribution of their real estate, with a correctly executed and recorded transfer on death deed. Transfer on death deeds are nontestamentary, which means ownership of the property passes to the beneficiary without instructions in a will or the need for probate (64.80.040). The deed can be revoked or changed quite easily. However, unnecessary conflicts are likely to add confusion and expense, so best practices dictate that landholders should try to ensure that their wills and TODDs lead to the same outcomes. Donating your property to the land trust through a Transfer on Death Deed is now an option that may be attractive to landowners.

Trade Lands – Donate Land or Residences And Save Other Lands

Trade lands are properties donated to a land trust that may not have significant conservation characteristics. They can be developed or not, and can be residential, industrial, or commercial. These trade lands are donated to land trusts specifically to be sold (sometimes they are conserved with an easement and then sold) with the proceeds going to the land trust. The donation can be outright or devised through a will. Trade land donations often have tax benefits.

Option to Purchase

This is a contractual agreement between a landowner and land trust on a sale price, and a specified amount of time to raise funds or grants to buy the property. If the land trust cannot raise the funds in a specified time, the landowner is free to sell it to someone else.