How Preservation Pays?
(Page 4 of 8)
August/September 1995
by Molly Miller
In some areas where citizens pass tax bonds and government programs exist, landowners are compensated financially for the loss of these development rights (See "Public Options for Preserving Land:'). If a government program for purchasing development rights has not been established in your area, the only way you can obtain a guarantee that your land will not be developed is to donate your development rights. Whenever you give up your development rights, you are granted income and estate tax deductions equal to the value of the development rights retired.
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A conservation easement doesn't cost you anything, but there is loss of potential profits because you rule out ever selling to a developer. Many landowners are understandably reluctant to forfeit this option. The tax break usually doesn't quite make up for what you would get if you sold off your place to a developer.
Conservation easements can contain specific restrictions about changing the land or building on it. You may write in exceptions to the restrictions to meet your needs and you may later amend the restrictions if unanticipated needs arise. In other words, the restrictions are negotiable. They are meant to keep subdivisions and strip malls off the land; they are not meant to make your life difficult or endanger your livelihood.
If you're going to sell your land, you can sell it to a conservationist, like a land trust. If you sell to a conservation agency, you guarantee the land will not be developed, but of course you get substantially less money for it than if you were to sell your land to a developer. And once again, you get some form of tax break. Public agencies or nonprofit land conservation organizations buy farms at prices sometimes up to 60 percent below appraised market value and the difference between the appraised market price and the bargain sale price is considered a charitable gift for your tax purposes. AFT refers to this conservation method as a bargain sale. It's clear a "bargain sale" is no bargain for the landowner. This option is for a limited number of landowners whose main financial concern is finding a good tax break.
If you want to control what happens to the land after you're gone, you may want to consider leaving your land, or your development rights, to a conservation organization in your will. You can also transfer the deed to a conservation organization while you're alive, with a special clause that you retain full use of the property during your lifetime. Lawyers call this agreement a Reserved Life Estate.
Public Options for Preserving Land
Most public options for preserving land involve passing legislation. In areas where government preservation programs exist, incentives to conserve land include financial compensation for development rights, property and inheritance tax breaks, grants, and low-interest loans. Public options may seem more complicated or more restricting, but there's also a lot more money available to you through them. The purchase of conservation easements program, or PACE, is one of the most economically viable option for land conservation.
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