Donation of a Conservation Restriction
A conservation restriction (or CR) is a voluntary, legal agreement between a landowner and a land trust, such as the Truro Conservation Trust, or a government agency, that limits a property’s uses in order to protect its conservation values.
When you own land, you also hold many rights associated with it, such as the right to build structures. When you create a conservation restriction, you agree to modify or give up some of those rights. For example, you might give up the right to build more houses, while retaining the right to keep a view open or create gardens.
Future owners also will be bound by the terms of the agreement. In exchange for giving up the right to develop the land, the assessed value of the property is typically greatly reduced, substantially cutting down on the property tax due on the land every year.Also, a charitable deduction is available for tax purposes the year that the CR is donated. The conservation restriction is a very flexible tool, and can be an exceedingly useful tool in estate planning.
The conservation restriction (called a “conservation easement” in some states) is drafted in a way to protect critical open space resources and meet the financial and personal needs of the landowner. In some cases, a conservation restriction may apply to just a portion of the property, leaving the option of development open for the remaining part. Most restrictions are intended to be permanent. The holder of the restriction takes on the responsibility and legal right to enforce the agreement.
If a future owner or someone else violates the agreement (perhaps by erecting a building the restriction doesn’t allow) the holder will work to correct the violation. Owners of highly valued property may also use the restriction to lower the value of their estate for estate tax (or inheritance tax) planning. The combined federal and state estate tax can be as high as 55%, sometimes forcing children to sell the property simply to pay off the taxes. A conservation restriction can lower the estate tax, and perhaps provide the way for heirs to retain title to a cherished family asset. Estate planning with the aid of professional advisors is critical.
Sale of a Conservation Restriction
A conservation restriction is also sometimes sold by the landowner to the acquiring entity. All of the above comments regarding a donated CR still hold, with the exception that no charitable tax deduction is available, unless it is a bargain sale of the CR.