Conservation easements are a powerful tool to protect farm and ranchland from development and keep it in the family. How do they work?
Each conservation easement is a legal agreement that binds to the land into the future. It becomes part of the title of the land. Depending on the reason for the easement, different private land owner rights are given up for all time with respect to that land. In the case of a private farm or ranch that needs to be protected from development or subdivision, a conservation easement allows a property owner to legally sell or donate the rights to develop that land to a land trust or government.
When you give up the rights to develop the land for all time, and an organization like the Nature Conservancy holds that conservation easement, it means that the development value of the land is lost. You can still sell the land, but for the value of the land in agriculture. The only right as a property owner you’re giving up is the one specified in the easement. You can still sell or donate the land; the kids can still inherit. You can live there and work the land forever. The only thing that can’t happen is the land can’t be developed in the way set out in the conservation easement.
Conservation easements can be purchased or donated, and there are tax implications for both ways. Each state has guidelines, tax incentives, and organizations designed to help with the process. The USDA also has an agricultural conservation easement program designed to help people through the steps and to raise money for purchasing conservation easements.
Federal income tax and estate taxes are significantly affected by a conservation easement. If you have questions about how a conservation easement will affect your estate planning, please contact us.
