Conservation Easements

What is a Conservation Easement?

A conservation easement is a legal agreement between a landowner and a qualified conservation organization – such as a land trust, governmental entity, or charitable organization – that permanently limits certain uses of the land (e.g., development, subdivision). Easements are recorded in the local recorder’s office and are binding on future owners. The conservation organization monitors use of the land and enforces the requirements of the easement. The landowner, his or her advisors, and the conservation organization work together to tailor the easement to meet the owner’s specific goals and address the unique character of the property.

The landowner retains ownership of the land and may use it in any way that’s consistent with the conservation easement. The owner can sell the land, give it away, or leave it to his or her family – subject to the easement.

Conservation easements don’t require that the public be given access to the land, nor do they confer any ownership rights on the conservation organization.

Financial Benefits

Conservation easements can produce significant income and estate tax benefits. The donor can deduct the value of the easement (usually the difference between the land’s value with and without the easement) as a charitable gift. The charitable deduction is limited to 30 percent of adjusted gross income. But if the value of the easement exceeds that limit, the excess can be carried over and deducted over the next five years (subject to the 30-percent ceiling). In addition, many states provide substantial income tax deductions or credits.

Because a conservation easement reduces the market value of the land, it also lowers estate taxes. In addition, the donor is entitled to exclude up to $400,000 of the land’s value from his or her estate ($500,000 next year). These estate tax benefits can help ensure that the landowner’s family will receive the land without having to sell off part of it to pay estate taxes.

Conservation easements aren’t limited to rural or park areas; they’re available in urban and metropolitan areas as well. Proposed tax legislation contains provisions that will make conservation easements even more widely available than they are now.

Conservation easements are powerful estate planning tools that can help keep land in the family and preserve its beauty, utility, and traditional use for generations. They can also provide current income tax deductions and significant reductions in estate taxes.