Acre By Acre
by Laurie AllmannA bluff-top nature preserve paid for in part by a children's lemonade stand. A working farm with an easement that protects a neighboring prairie restoration project. The gift of parkland as a parting "thank you" to a community. Behind each of these Minnesota stories is a private landowner who made a personal choice to safeguard a natural area.
Have you wondered what the future will hold for your land? Have you enjoyed watching the wildlife that resides there, or the passage of seasons reflected in the natural landscape, and wondered how you might keep it intact for years to come?
If so, this article is for you.
Whatever your goals for your land, there are tools and strategies that can help you protect what you value. This overview will get you started and suggest organizations and resources that can offer help. As you review the options, please note that all references to potential tax benefits are subject to tax law. You'll need to consult a tax professional regarding your ability to make use of such benefits.
Calm in the wetland
photo: Jeff Strate
Begin by identifying the qualities you hope to preserve (e.g., wildlife habitat, farmland, scenic views, natural features such as a wooded ravine or native prairie). Then consider your personal goals. Do you hope to live out your lifetime on the land? Sell it when you retire? Pass it on to your heirs?
Keep It
The following options allow you to protect your land while retaining ownership to it.
Property Tax Relief Program. Are rising property taxes forcing you to consider selling land for development when you don't wish to? You may be eligible for property-tax reduction and exemption programs based on your land's conservation values.
Things to consider:
- The program may limit use of the enrolled property. For example, it may allow haying but prohibit grazing.
- Programs may have minimum acreage requirements and may be limited to particular counties.
- Enrollment may require commitment of a period of years and be subject to renewal.
- Benefits may include exemption from undesired public works projects and related assessments.
- Some programs only defer taxes until land is no longer enrolled. Upon withdrawing your land from such a program, you may be obligated to pay all or a portion of the taxes incurred during the enrollment period.
Deed Restriction. A deed restriction limits development and use of a property. An attorney can help you add it to your property title.
Things to consider:
- State law limits enforceability to 30 years.
- No formal monitoring program ensures compliance.
- Because it "runs with the title" when property changes ownership, it can guide use of land that you intend to sell or donate. This may be of particular interest if you will continue to own and/or live on adjacent property.
- One type of deed restriction, the mutual covenant, may be used by neighboring landowners to set up commonly desired restrictions on land use and development.
Some trees as old as 120 years can
be found in Wayzata's Cenacle Big Woods
photo: Polly Norman
Perpetual Easement. A perpetual, or permanent, conservation easement is the key to protecting your land whether you keep it, sell it, or donate it. It's a legal agreement between a landowner and a private land trust or government agency. It places a permanent limitation on a property's development and use. The land trust or agency is said to "hold" the easement and monitors the land to ensure that easement terms are upheld in perpetuity.
Under Minnesota law, a conservation easement may be established on land in order to "assure its availability for agricultural, forest, recreational or open space use, protecting natural resources, maintaining or enhancing air quality, or preserving the historical, architectural, archaeological, or cultural aspects."
Things to consider:
- You retain ownership of the property. Should you decide to sell, give, or transfer the land, the easement "runs with the title" to obligate any and all future owners.
- Depending on the holder of the easement, terms may be negotiable, designed to accommodate your interests while providing appropriate protection for the land's conservation values.
- A perpetual conservation easement may be conveyed to a qualifying nonprofit land trust or government agency in the following ways: sold at fair market value, sold in a bargain sale (in which part of the value is donated), donated during your lifetime, or donated as a bequest (in your will).
- If an easement results in a decrease in the overall appraised value of the land, it has the potential to reduce your property taxes and reduce estate taxes for your heirs. Donation of an easement — unless made by bequest — may qualify as a charitable deduction for income-tax purposes. For example, if you donate an easement and the appraised land value drops from $215,000 to $45,000 due to loss of development potential, you might be eligible for a $170,000 charitable income-tax deduction.
- You may be responsible for some of the related expenses such as attorney fees, appraisals, and an "endowment fee" to help defray the easement holder's long-term expenses.
Early spring in Birch Island Woods
photo: Jeff Strate
Sell It
If you no longer wish to own your land, or are looking ahead to a time when you will want to transfer title, here are a few approaches for selling your land.
Is your land appropriate for a school nature area, park, wildlife area, or preserve managed by a public agency or nonprofit organization? You can help make it possible for such "conservation buyers" to acquire the land by informing selected organizations or agencies of your interest in selling, and by working cooperatively with them on the timing and terms of the transaction.
Remember, whether you sell or donate your land, you have no long-term guarantee about the property's use unless you establish a perpetual conservation easement before you transfer the title.
Things to consider:
- If the buyer needs time to finance the purchase, an Option to Buy agreement can be a useful tool. This gives the buyer the exclusive right (though not the obligation) to buy the land during a specified period. If the purchaser's policies permit, you could be paid a nonrefundable option fee, which may (if you wish) be applied toward purchase of the land.
- If you make the sale subject to reservation of a life estate, you (and any named heirs) will be able to live out your life on the land. Be aware that this will likely reduce the price you receive for your land.
- A bargain sale could make the transaction affordable for a conservation buyer with limited financial resources. It also could reduce your capital gains tax and qualify you for an income-tax deduction.
Donate It
Donation of your land can be structured to suit your needs and interests. Your first task will be to select the potential recipient and determine whether the organization is interested in the land.
Note that the following considerations also apply to donating conservation easements.
Things to consider:
- If you donate land during your lifetime, you may be eligible for an income-tax deduction. Current tax law allows you to spread this deduction over six years. You can extend this period if you make the donation in increments, referred to as donation of undivided partial interest. Your tax advisor can help you weigh the pros and cons.
- If you donate land as a bequest (in your will), you will not be able to take advantage of a related income-tax deduction during your lifetime. However, the donation may reduce estate taxes owed by your heirs.
- If you donate land subject to reservation of a life estate, you (and any named heirs) will retain the right to live out your life on the land. You may be eligible for an income-tax deduction based on a formula that estimates the value of the reserved life estates.
- A donation can be one aspect of a larger, fair market value sale of property. Youll pay less in capital gains tax, and the income from the acreage sold at fair market value may help you to maximize use of any income-tax deduction related to the donated parcel.
Putting It All Together
The landowner conservation initiatives described here illustrate just a few of the many ways landprotection tools can help you meet your goals for your land. As you consider scenarios for your property, be sure to get input as needed from your attorney, financial planner, and estate planner. Good luck!
Laurie Allmann is an environmental writer from Marine on St. Croix. She is the author of Far From Tame and a handbook for landowners called Land Protection Options.
Reprinted with permission from Laurie Allmann.