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|Steps to donating a conservation easement
This is an initial meeting where the landowner can share with the land conservancy staff goals, needs, and interests regarding the property, as well as express specific concerns and questions that apply to your particular situation. Land conservancy staff explain the role of their conservancy, how conservation easements work, and addresses specific concerns and questions.
Throughout the entire process of donating a conservation easement, land conservancy staff facilitates the transaction, but the landowner retains his/her own advisors, such as an attorney, accountant, appraiser, and surveyor.
Seek advice from an accountant, attorney, appraiser, banker (if you have a mortgage on your land), and a surveyor (if you intend to subdivide your land). The cost of these services will vary depending on your circumstances and the provider of the service.
a. Accountant. The tax ramifications of a charitable donation/tax credit will be different for each person. Seek an accountant who is experienced in this area.
b. Attorney. The conservation easement agreement is forever. You should discuss this agreement with an attorney well experienced in conservation easement agreements.
c. Appraiser. An appraisal of your land is required. Your land will be appraised for its agriculture value and for its development value. The appraiser should have experience in this area of appraisals.
d. Banker. If you have a mortgage on the land on which you are planning to donate a conservation easement, your bank or Mortgage Company will have to subordinate their interest to the District.
e. Surveyor. If you intend to subdivide your land, you will need a "legal description" for the parcel of land on which you want to donate conservation easement. A survey will determine the boundaries of the parcel. If the property does not have a survey, then one can be contracted with a surveyor or, in some cases, a surveyor can prepare a metes and bounds legal description.
In order to evaluate the conservation values of the property and as preparation for drafting a conservation easement, one or more land conservancy staff members walk your property to become familiar with its features and characteristics.
Property Title Review
The land conservancy researches the details of your property's title in order to determine if there are title-related issues that need to be addressed by the conservation easement, such as, third party ownership of natural resources (gas, oil, and/or minerals) on the property, access easements, mortgages, and other liens.
Resolution of Mortgage Issues
If your land is subject to a mortgage, the mortgage must be subordinated to the conservation easement for the conservation easement to be considered perpetual in nature, which is a requirement for a federal income tax deduction. If there are any mortgages on the property, the mortgagor must be contacted and a consent agreement must be developed. Consent from the mortgage company is required to satisfy the IRS regulations related to conservation easements. Some mortgage companies may charge a fee for this service. Costs for the title work and mortgage subordination are the responsibility of the landowner.
Conservation Easement Drafting and Discussion of Conservation Easement Terms
The land conservancy prepares the first draft of the easement and then the landowner and his/her lawyer review it. This can require a significant amount of time depending on the complexity of the easement. The land conservancy is in frequent contact with the landowner, and/or his/her representatives, in order to create a mutually acceptable easement document.
A Baseline Documentation Report is completed by the land conservancy during this time period as well. This document becomes an exhibit to the conservation easement and is required by the tax law. The purpose of the Baseline Report is to establish the condition of the property at the time the conservation easement is granted and to document its conservation values.
Land Conservancy Board Approval
Once you decide to move forward with the conservation easement and land conservancy staff conclude that the property meets their conservation guidelines, the land conservancy's Board of Directors must approve the project.
Execution of Final Conservation Easement
The final conservation easement must be signed by the landowner and land conservancy and notarized. The landowner is given a fully executed copy at the time of signing.
Recordation of the Conservation Easement
The signed easement document, including the Baseline Report, is recorded at the County Recorder's office. The original is then returned to the land conservancy, and the land conservancy sends a copy of the first page, showing the recording information, to the landowner.
Completion of An Appraisal
If you are planning on claiming a charitable gift tax deduction for the conservation easement donation and you believe the gift is greater than $5,000, the tax laws require that you have an appraisal made to determine the value of the gift. An easement donation may qualify as tax deductible if the conservation easement constitutes a "Qualified Conservation Contribution", one of the requirements of which is that the land has unique features and characteristics that make it important to preserve.
A Qualified Appraiser (as defined by the tax laws) must prepare the appraisal showing the "before value" (the value of the land without a conservation easement and having full development value) and the "after value" (the value after the property has been restricted by a conservation easement). It is the difference between these two numbers that the tax laws consider a charitable gift.
The full appraisal is completed after the conservation easement is signed. It is useful, however, to involve an appraiser early in the process if the extent of the tax deduction is an important factor in the design of the conservation easement.
The land conservancy requires a copy of the appraisal for review.
Acknowledgement of Charitable Gift
Once the appraisal is completed and the value of the charitable gift has been determined, the landowner fills out and signs IRS form 8283 indicating the value of the charitable gift. Form 8283 must also be signed by the appraiser and, after review, by the land conservancy for the purpose of acknowledging receipt of the charitable gift.
After the conservation easement is signed and recorded, the land conservancy begins its stewardship program. The land conservancy is required by law to have the resources necessary to uphold the terms of the conservation easement restrictions. The land conservancy funds this obligation, in part, by encouraging each easement donor to contribute to its Stewardship Fund, if they are able. This fund helps the land conservancy cover the costs of monitoring and enforcing the terms of the easement in perpetuity.
The land conservancy determines the amount of each contribution based on a formula that accounts for the easement terms. Easement donors can make a gift in a variety of ways, including over time or through their estate plan by including a transfer fee in the conservation easement and by charitable gifts made by conservation easement donors. Land conservancy staff and/or trained volunteers visit the property once per year to monitor the conservation easement to ensure that the terms of the easement are being upheld.
Steps to Donating a Conservation Easement is intended as a general explanation for landowners who are contemplating the donation of a conservation easement. However, each landowner's situation is different and he/she should always consult an advisor before proceeding.
Parts of information above from Western Reserve Conservancy, OH
Talk with your family and a qualified accountant to decide if a conservation easement fits with your family and financial goals. Often, many different family members will have an interest in the property, and one or more family meetings might be useful.