Donating a conservation easement is an admirable way to permanently protect the natural features that make one’s property special. Because the goal is permanent protection, care must be taken to make sure the process is done in a manner that allows FLT to enforce the conditions of the easement for years to come. In addition, careful planning will greatly improve the chances that the easement donor will qualify for the possible tax benefits. As such, FLT will follow the procedures outlined here when considering an easement donation.
After an initial discussion with the landowner about the natural features of their property, the goals of the easement, and any desired reserved rights, the FLT board will then review the merits of the potential donation. If the property appears to satisfy the necessary criteria for conservation projects, FLT will then conduct a full baseline inventory of the property. This inventory enables FLT to document the significant features of the property to be protected, to assess the necessary public benefit required of any conservation easement, and to assess whether FLT has the resources to monitor and protect the property. In addition, FLT will need to perform a title search to identify any encumbrances on the property. The prospective donor can assist here by providing copies of any existing title insurance policies. To qualify for a federal tax deduction, property with an existing mortgage must first have the lender agree that in the event of a foreclosure the easement will not be extinguished. Landowners should at this point seek legal and financial counsel to review the merits of proceeding. The property may need a formal boundary survey.
If, after reviewing this data, the FLT board feels the project meets the defined criteria needed to continue, then a draft easement is developed collaboratively. The document will detail the needs of the landowner and any desired reserved rights, the features of the property to be protected, and the monitoring and enforcement procedures to be followed. The easement must comply with the requirements of IRS Code, Section 170(h). The final easement must be approved by the FLT board and reviewed by the donor's legal counsel. Once the easement is signed, FLT will have assumed the legal obligation to insure that the terms of the easement are maintained in perpetuity. The property will be monitored on a regular basis (usually yearly) and each visit will ideally include a meeting with the current landowner.
The FLT encourages all donors to obtain an appraisal of the easement by a qualified appraiser. Donors must attach a copy of the appraisal (signed by FLT) to IRS Form 8283 to qualify for an income tax deduction.
The donation of an easement represents a major commitment for any landowner. Although the tax benefits may be one incentive for such a gift, most donors give an easement primarily to protect their land. By accepting an easement, FLT assumes the legal obligation to uphold the terms of the easement in perpetuity. While the donor has made a gift of great significance, FLT has, in a sense, assumed a liability forever. In order to assist FLT in fulfilling its present and future responsibilities, contributions (usually tax deductible) must be raised with each easement gift. Although the amount of support needed varies, several costs are constant- transactions costs (documents, legal fees, recording fees, title searches) and monitoring costs (baseline inventories, field visits, legal costs, potential enforcement expenses). For each easement donation, FLT will set a target for contributions to be raised. While this frequently will come from a tax-deductible contribution from the donor, FLT will work with potential donors to find other potential sources (such as foundations or fund raising appeals).
The easement process can take some time, but it is also rewarding. Landowners (and we at FLT) should try and keep in mind that the goal is to permanently protect those special places that make this such a wonderful community.
If you would like more information please contact Francestown Land Trust