Volunteers take a break from walking the land of a potential NPC project.
Doing nothing to protect it may doom your land to development.
Estate taxes are one reason. Federal taxes can be as high as 55% of a property's fair market value, virtually forcing heirs to sell it. And, of course, future owners may be compelled by ever-increasing property values--or simply by a lack of appreciation for the land--to sell it for development.
A land trust like the Northcentral Pennsylvania Conservancy is a great resource for assisting landowners find ways to protect their land. Here are a few of the options available:
Conservation Easement
A legal agreement between a landowner and a land trust or government agency that permanently protects land while the landowner continues to own it. Donating the easement can result in reduced income tax and estate tax.
Land Donation
Donating conservation land to a land trust is a wonderful way to share its beauty with future generations. The donation can even be set up in a way that allows you to continue to live on the land or to receive a life income.
Bargain Sale of Land
Selling land to the land trust at less than its fair market value can make it affordable for the land trust and provide tax benefits for the landowner.
A conservation easement is a legal agreement between a landowner and a conservancy that restricts the type and amount of development that can occur on a property. Each conservation easement is designed for the individual property and landowner’s wishes.
Conservation easements do not affect the landowner’s ability to sell the property or to pass it on to a family member or friend. However, the conservation easement assures that any future owner will have to respect the conservation values of the property. Future owners will only be able to develop the property to the extent that the conservation easement allows.
Click here for links to more information about conservation easements.
LAND DONATION
Donating land releases you from the responsibility of managing the land and can provide substantial income tax deductions and estate tax benefits (while avoiding any capital gains taxes that would have resulted from selling the property). Most important, if the land is donated because of its conservation value, it will be protected. (Although our focus here is on conservation land, commercial and residential properties can also be donated to a land trust, with the understanding that the organization will sell the land to support its conservation work.)
Donating a remainder interest in land By donating a remainder interest, you can continue to enjoy your land and may be eligible for an income tax deduction when the gift is made. The deduction is based on the fair market value of the donated property less the expected value of the reserved life estate.
Donating land by will Land donations that establish a life income
Your gift of land usually qualifies for a charitable income tax deduction at the time of the gift, based on the value of the land less the expected value of the annuity payments.
Another option for donating property and receiving regular income is a charitable remainder unitrust. You place the land in a trust, first putting a conservation easement on it if it is to be protected. Then the trustee sells the land and invests the net proceeds from the sale. One or more beneficiaries you specify receive payments each year for a fixed term or for life, then the trustee turns the remaining funds in the trust over to the land trust.
The gift qualifies for a charitable income tax deduction when the land is put in the trust, based on the value of the land less the expected value of the payments.
Charitable gift annuities and charitable remainder unitrusts are most useful for highly appreciated land, the sale of which would incur high capital gains tax.
BARGAIN SALE
MORE INFORMATION
Note: The information on this website is designed to provide accurate, authoritative information in regard to the subject matter covered. The Northcentral Pennsylvania Conservancy is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of experienced professional advisors should be sought.
Donating land for conservation purposes is truly one of the finest legacies a person can leave to future generations. It may be the best conservation strategy for you if you do not wish to pass the land on to heirs; own property you no longer use; own highly appreciated property; have substantial real estate holdings and wish to reduce estate tax burdens; or would like to be relieved of the responsibility of managing and caring for land.
An outright donation is not the only way to give land. You can continue to live on the land by donating a remainder interest and retaining a reserved life estate. In this arrangement, you donate the property during your lifetime, but continue to live on and use the property. When you die (or sooner if you choose), the land trust gains full title and control over the property.
If you want to own and control your land during your lifetime, but assure its protection after your death, you can donate it by will. You should make sure the chosen recipient is willing and able to receive the gift.
If you have land you would like to protect by donating it to a land trust, but need to receive income during your lifetime, you might use a charitable gift annuity. In a charitable gift annuity, you agree to transfer certain property to a charity, and the charity agrees to make regular annuity payments to one or two beneficiaries you specify for life.
If you need to realize some immediate income from selling your land, yet would like the property to go to a land trust, a bargain sale might be the answer. In a bargain sale, you sell the land to a 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 entitles you to a charitable income tax deduction based on the difference between the land's fair market value and its sale price.
The Conservancy has additional written material on land protection options available through its office. Please call 570.323.6222 or submit your request for more information by going to the Contact Us page of this website.