For
those of you new to land conservation, we have articles to introduce you to the
basic concepts. These articles will help you understand the federal and state tax
and estate planning issues and incentives associated with charitable donations of
land and conservation easements. Our library of technical articles and papers addresses
current issues and topics for the conservation professional as well. Once you are
ready, connect with the local professional advisors to explore options for the future
of your land.
Before you can decide what is right for you and your land, review some basic definitions associated with the conservation tools commonly used in estate planning for real estate assets.
Read More »By: Colleen Schreiber
Some choose to use conservation easements; others choose not to, but either way, a wise choice requires education on what can be a complicated subject. To aid in that education process,
Texas Agricultural Land Trust recently sponsored a seminar in which they brought in a renowned authority on the laws pertaining to conservation easements, with an emphasis on using this tool for estate planning. Massachusetts-based
Stephen J. Small was an attorney for the IRS prior to starting his private practice. During his stint with the IRS, Small was responsible for writing the federal income tax regulations on conservation easements.
Read More »By:
Adam Miller
It may come as a shock, but there is a sort of symbiotic relationship at work between property owners with conservation easements and the IRS. Hard to believe, I know. We understand that the IRS gives tax breaks for those who protect their property from certain development and use. In special circumstances, these landowners can find tax breaks that many others will not reach, similar to the nectar only available to the unique and capable hummingbirds.
The Landowner, Conservation Easements & the 2010 Roth Conversion. At the beginning of 2010, the $100,000 MAGI (Modified Adjusted Gross Income) limit on Roth IRA conversions was lifted. Individuals that were not able to convert an IRA to a Roth in previous years may now be eligible, and the subject is getting quite a bit of news.
Read More »By:
Robert LevinHow does one go about donating or selling a conservation easement.? There is no one right way to go about it. However, the following outline shows the most common steps to the process. Conveying an easement may take anywhere from a few months to a couple years, depending on a variety of factors. The landowner usually must pay for basic legal expenses, and appraisal, and in many cases is asked to make a stewardship donation to ensure that the land remains protected forever. Although the following outline discusses easements, a similar process typically applies to donations of whole interests in land as well.
Read More »By:
Robert LevinThe following is an adapted version of an article that appeared in Tax Notes Today in October 30, 2000. Robert H. Levin is a practicing Maine attorney who specializes in land conservation. He works with land trusts and landowners on all aspects of conservation matters. In this article, he examines the opportunities available under Section 2031(c) of the Internal Revenue Code, in particular the post-mortem donation of a conservation easement. The article demonstrates that fiduciary obligation law in most states does not prevent a personal representative from donating a conservation easement from a decedent’s estate. The author would like to acknowledge
Read More »The IRS is involved and interested in land conservation. The agency provides incentives, namely tax deductions, and enforces compliance with the tax code for tax deductions identified as conservation contributions. A conservation contribution is defined by the Internal Revenue Code § 170(h).
Read More »By: Jeremiah P. Cosgrove and Judy Anderson
Based on the belief that a working, commercially-viable, agricultural landscape is the desired long-term land use, and that the soil resource is the foundation for agricultural protection, conservation organizations are realizing that agricultural easements, compared to scenic open space or historic easements, are very different.
In general, agricultural easements recognize the farmer’s need to be able to respond to a changing agriculture and are written with the knowledge that farmers, perhaps more than any other group of landowners, must make countless decisions on a daily basis about how they work the land, and respond to new market conditions. Timing and flexibility can be critical when deciding if they need to construct a new fence, plant a particular crop, apply nutrients and chemicals, construct or renovate a building, or subdivide or acquire a parcel of land.
Read More »This regulation elaborates on IRC section 170; further expalining what a qualified conservation contribution is.
Click here. Read More »This case provides an overview of charitable purpose requirements for tax exemption of forest land in Massachusetts. The case is an appeal from the refusal of the Town of Hawley (“assessors” or “appellee”), to abate a tax on certain real estate located in the Town of Hawley owned by and assessed to New England Forestry Foundation, Inc. (“NEFF” or “appellant”) for fiscal year 2010.
Read More »By: Jeremiah P. Cosgrove and Renee J. Bouplon
Based on the belief that a working, commercially-viable, agricultural landscape is the desired long-term land use, and that the soil resource is the foundation for agricultural protection, conservation organizations are realizing that agricultural easements, compared to scenic open space or historic easements, are very different.
Read More »By: Breana Behrens
Baseline documentation is a record of what the land subject to a conservation easement looks like at the time of the donation. Maps, descriptions, and pictures of the preserved property and resources are important for outlining the conservation goals of the donor, as well as enforcing the conservation easement and settling future disputes about the use of the land. Baseline documentation is required by the IRS if a donor reserves a right to the land that may impair a protected conservation interest.
Read More »By:
Stephen J. Small, Esq.In this comprehensive article, Boston attorney Stephen J. Small notes that a small number of "bad" conservation easement deals threaten to poison the well for otherwise successful, appropriate, and important private land conservation transactions if IRS enforcement is not targeted at the promoters, appraisers, and others engaged in the bad deals. Small also discusses the main tax and planning hurdles that make it difficult for a real estate developer to get a meaningful income tax deduction for the donation of a conservation easement, including the tricky question of whether a conservation easement is characterized as a capital asset or inventory. Finally, Small makes suggestions for better enforcement in this area, including presenting a list of questions the IRS might ask on a revised Form 8283, "Noncash Charitable Contributions," or other reporting form.
Read More »A simple example illustrates how a conservation easement works in practice. Let’s assume pressure from buyers building vacation homes has pushed the value of land up in recent years to the point where the family is concerned about how the next generation will pay the estate tax bill without selling the land.
Read More »By: Breana Behrens
Treasury Regulations 1.170A-14 explains that a conservation easement must be for a conservation purpose in order for a donor to recieve a charitable tax deduction. There are four conservation purposes that the IRS will consider valid preservation for; outdoor recreation or education, natural habitat, open space or certified historic structures.
Read More »In a letter, the IRS clarified that state law may provide a means for exterminating a conservation easement. However, the requirement of section 170(h) that a conservation purpose must be protected in perpetuity and can only be exterminated or amended by a judicial proceeding must be met.
Read More »By:
Jessica Jay and Melissa K. Thompson
This article surveys conservation easement enforcement and defense decisions to date, and examines those decisions under the rubric of several general themes. The article focuses on themes influencing or driving the opinions of
courts in conservation easement enforcement and defense actions across jurisdictional lines. These themes include issues of standing, ambiguity and the role of intent in judicial decision-making on issues of conservation easement enforcement and defense, judicial attitudes towards restrictive servitudes, the role of common law rules of real property and contract construction and interpretation, and cost-benefit analyses.
Read More »By:
Elizabeth WroblickaConservation easements (“CE”) present a unique challenge to those who seek to uphold them in court. Given the nature of perpetuity, it is inevitable that the inPiduals involved in preparing and negotiating a CE will be deceased when it comes time to enforce its provisions at a trial many years from now. The CE deed may not contain terms that adequately define or describe the original intent of the parties or the condition of the land. The land trust and public agency (collectively “holder”) seeking to defend or enforce a CE in court will need to introduce evidence in the form of supporting documents such as photographs, maps, monitoring reports and correspondence to establish the critical elements of its case.
Read More »By:
Nancy McLaughlinOn January 30, 2013, the United States filed a complaint against a land appraiser and his company. According to the complaint, he had appraised more than 90 conservation easements for purposes of the deduction under IRC § 170(h) and earned substantial fees for his appraisals, ranging up to $40,000 for a single appraisal.
Read More »By: Resources First Foundation - RFF
Conservation easements can be a valuable tool to ensure that you can keep your working landscape viable. It is a restriction on the use of your property that is voluntary and modifiable to fit your needs.
Read More »This case addressed whether the landowners may construct a dwelling for their use anywhere on the land they own that is subject to an agricultural preservation restriction (conservation easement). The court held that the terms of the restriction granted the landowners the right to build, but the location is subject to the approval of the commissioner.
Read More »By: Breana Behrens
A private landowner that would like to sell or retain rights to subsurface gas, oil, or minerals may still be able to place a conservation easement on their surface estate.
Read More »By:
David BraunConservation easements are extraordinary tax and estate planning tools for clients with recreational or agricultural land they wish to keep undeveloped over many years or generations. Easements result in major income and estate tax savings and sometimes property tax savings, thereby greatly increasing the affordability of undeveloped land. These savings improve flexibility and allow clients to respond to competing planning priorities. The financial implications of easements are complex, and clients committed to long-term ownership of recreational or agricultural land need help assessing this strategy.
Read More »By: Breana Behrens
Making lifetime gifts is one way to transfer your land and can play an important role in your estate planning.
Read More »By: Breana Behrens
Making a plan for your property for when you pass away is not usually an enjoyable task, but it is extremely important, especially for private landowners. Your land is your legacy and it plays an integral role in the preservation of rural communities and our natural resources.
Read More »By: Breana Behrens
A family limited partnership (FLP) is a useful estate planning tool that can help ensure that your family land and business remains whole after you pass. It can also help minimize gift and estate taxes.
Read More »By:
James A. Houle, Esq.A GRAT is an estate planning tool that can help you minimize gift and estate taxes.
Read More »By: Bruce Givner
In
Estate of Kite v. Commissioner, the tax court ruled that transfer of interest in the family company in exhcange for three private annuity agreements was not a disguised gift, thus not subject to gift taxes. This ruling makes private annuities an important estate planning tool.
Read More »By: Roger A. McEowen
In mid-December of 2010, the Congress passed and the President signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (Act).1 The Act contains the most significant changes to transfer taxes (estate, gift and generation-skipping tax) in decades. The changes are so significant that standard estate planning techniques may no longer be necessary. However, the changes are only for 2011 and 2012,2 with no certainty at the present time as to what 2013 may bring. So, the uncertainty concerning the future of the estate tax that was present for much of 2010 is only removed through 2012.
Read More »By: Roger A. McEowen
The estate planning version of the technique involves an estate plan whereby the decedent leaves a set dollar amount of the estate to the decedent’s children (or specific beneficiaries) with the residuary estate passing to a charitable organization. The portion passing to the charity qualifies for the estate tax charitable deduction and, thus, puts a “lid” on the amount of estate tax owed. That could be a particularly useful concept (especially for farm and ranch estates) if the Administration succeeds in its present attempts to eliminate valuation discounts for closely-help business interests or in its attempts to push through the Congress an increase in the federal estate tax.
Read More »By: Alan Orlowsky
This article is a look at situations where life insurance can provide value to you and your family in estate planning.
Read More »By: Patricia M. Annino
Clients have the option of decanting an irrevocable trust if circumstances or estate planning issues change.
Read More »By: Barry Amundson
Although complex, estate planning needs to be done to help farmers and ranchers save on taxes and help pass the farm onto the next generation.
Read More »By:
Thomas HallThe Braun and Gresham lawfirm in Texas has produced a comprehensive webinar on estate planning for legacy land, or land that you have an emotional connection with.
Read More »By:
Harry L. Haney, John L. Greene and
William C. SiegelThe purpose of this book is to provide guidelines and assistance to nonindustrial private forest owners and the legal, tax, financial, insurance, and forestry professionals who serve them on the application of estate planning techniques to forest properties. The book presents a working knowledge of the Federal estate and gift tax law as of September 30, 2008, with particular focus on the unique characteristics of owning timber and forest land. It consists of four major parts, plus appendices. Part I develops the practical and legal foundation for estate planning. Part II explains and illustrates the use of general estate planning tools. Part III explains and illustrates the use of additional tools that are specific to forest ownership. Part IV describes the forms of forest land ownership, as well as the basic features of State transfer taxes and the benefits of forest estate planning. The appendices include a glossary and the Federal forms for filing estate and gift taxes.
Read More »By: Roger A. McEowen
Quite often an important planning goal for farmers and ranchers is to transfer the farming or ranching operation intact to the next generation. However, the cost of long-term health care is high, especifally for those facing long-term health care. As a result, avoidance of an unnecessary depletion of operating assets as well as sale of the land to pay for long-term health care may become a primary objective for private landowners.
Read More »By: Breana Behrens
A trust is an estate planning tool that allows you to maintain control over the distribution of your property and can help minimize gift and estate taxes.
Read More »By: Patricia M. Annino, J.D
Advisers are turning their attention to state estate taxes, investment choices for dynasty trusts, and other issues.
Read More »By: Farmers' Legal Action Group, Inc.
Brush up on definitions of key estate planning terms.
Read More »By: Dennis Fordham
Wealth transfers from parents to younger generations have different tax consequences and should be considered when creating an estate plan.
Read More »By:
Polly J. DobbsToo often farming clients misunderstand the estate planning process. This article explores the five common examples of estate-planning-gone-wrong for private landowners.
Read More »By: Dennis Fordham
California Supreme Court decision in
Estate of Giraldin holds that death beneficiaries may hold the trustee responsible for any breach of trust while the settlor was alive.
Read More »By: T.J. McEvoy
One of the most tragic failings of traditional forestry is an unreasonable emphasis on profitability. Although woodlands are capable of producing a sustained flow of products, the shorter the planning horizon of any particular owner, the less sustainable woodlands become (Landsberg and Gower 1997). The root of this unreasonable emphasis is a ridiculously antiquated system of property taxation based on “highest and best economic use.” It is hard enough for a woodland owner to keep up with property taxes in areas where the highest and best use is for forestry purposes. Near urbanizing areas, forests are assessed – by law – at highest and best use for development.
Read More »By: T.J. McEvoy
When title to property is held between two or more people as “joint tenants with rights of survivorship” (often abbreviated on documents as “JTROS”), the surviving joint owners automatically own 100 percent of the property when one owner dies. An interest that someone has in a JTROS property title is not part of the person’s probate estate. Whatever interest the decedent had in the property automatically reverts to the survivors.
Read More »By:
David BraunWhen someone owns land in his or her own name, they are very likely increasing their risk of loss from accidents or creditor’s claims unnecessarily. Accidents on farm and ranch land happen every year and create liability for landowners – sometimes forcing liquidation of family land or loss of other major assets. It is often wiser to own land through a limited liability entity like an LLC, a Limited Partnership, or an irrevocable trust, so that the liability is isolated from other assets. These entities also protect the land from other personal and business creditors.
Read More »By:
Stephen J. Small, Esq.The Taxpayer Relief Act of 1997 and its impact on Section 2031(c) of the IRC.
Read More »By: Breana Behrens
When co-property owners cannot agree on how to share their inherited property, a court can order that the property be split between the owners. This is called partition.
Read More »By: Kylene Scott
At least one out of five farmers doesn’t have a clue what will happen to their farm if they should die or have to stop farming. With the large amount of assets involved in a farming operation, why wouldn’t one have a plan for the continuation of the farm after a death of an operator? Read More »By: Ron L. Durst
Farmers and owners of other small businesses hold significant amounts of wealth in the form of business assets and are thus more likely than other taxpayers to be subject to the federal estate tax. Concern for the impact of the federal estate tax on the ability to transfer the farm to the next generation has been a primary factor in increasing exemption levels and special provisions targeting farmers and other small business owners.
Read More »By: Michael D. Duffy
Duffy, an extension economist at Iowa State University, has outlined the basic thought process when inheriting a farm. Many of the final decisions will depend on the nature and location of the land, as well as the number of heirs.
Read More »By: Michael Kitces
The MailBag blog answers the impact the Pease Limiation has on the Alternative Minium Tax.
Read More »By: Hembree Brandon
As land prices continue to increase, as well as the value of equipment and other farming assets, it becomes increasingly important to ensure that you have an estate plan to ensure that you do not exceed the federal estate tax exemption and have to pay significant sums to the IRS.
Read More »By: Legal Information Institute
Under the IRC qualified farm property may recieve special valuation treatment when the federal estate tax is calculated. This enables farm property to be passed to subsequent generations at a lower cost. In order to qulaify for special land use valuation, the property must meet certain requirements such as the farm assets must make up at least 50% of the estate, pass to a qualifying heir, and have been owned and farmed by the deceased for five of the previous eight years.
Read More »By: Breana Behrens
Land Link is a valuable program that connects beginning farmers with retiring landowners to faciliate farm transfers.
Read More »By:
Ariel SteeleBy donating a conservation easement, you are eligible not only for an immediate financial reward from state tax credits and federal deductions, but you can also save money on estate taxes for generations to come. Up to $500,000 of the value of your land that is protected by a conservation easement can be excluded from the value of your estate if certain requirements are met. At a 45% estate tax rate, that can add up to a savings of $225,000 when the land passes to the first heir, and very likely once again each time the land passes to another family member.
Read More »By: Dennis Stein
As farms manage more gross income, the need for improved financial accounting systems and increased management of farm income becomes necessary. Read More »This section explains what are taxable gifts and sets the present interest requirement.
Read More »By: Breana Behrens
The IRA Charitable Rollover enables taxpayers to make charitable donations directly to qualified chairtbale organizations from their IRAs without counting it as part of their AGI. By doing this, the taxpayer is not required to pay taxes on the amount donated.
Read More »By: Breana Behrens
Estate taxes are taxes levied on your property when you transfer it to others upon your death.
Read More »By: T.J. McEvoy
Forest owners who want to keep ecosystems intact and in the family have four options: family partnership, closely-held S-corporation, a qualified trust for conservation purposes or a limited liability company. Of the four, the simplest to set up and easiest to manage is also the most flexible alternative: a limited liability company, or llC. One of the useful features of an llC – especially as it relates to long-term management of forests – is that profit motive is irrelevant. Thus, the family forest llC can be dedicated to any purpose; investment, business, conservation or – best of all – any combination of motives. llCs provide the liability protection of a corporation, pass-through taxation aspects of a partnership, and the essential ability to restrict ownership in the family forest that a closely-held S-corporation provides. Plus, an essential added benefit, crucial to an entity that must add members at the same rate that families grow: there are no limitations on the number of members an llC can have. The individuals that form the lCC, also known as “founders,” have the choice of restricting the number of members (the concept of ‘members’ to an llC is exactly the same as ‘shares’ to a corporation), allowing fractional membership, forming more than one class of membership, or allowing membership to grow with the family.
Read More »By: Don Hofstrand
Financing is needed to start a business and ramp it up to a profitable operation. There are several sources to consider when looking for start-up financing, but first you need to consider how much money you need and when you will need it. Read More »By: Dennis A. Fordham
When an individual or a couple, as settlors, establishes a revocable living trust they are usually the initial trustees and beneficiaries. This gives them complete control to do as they please with their trust assets, within certain limits.
Read More »Estate taxes with respect to land subject to a qualified conservation easement.
Read More »By: Breana Behrens
The generation-skipping transfer (GST) tax is applied to transfers made to individuals that are much younger (not in the preceeding generation) than the donor.
Read More »This section is the foundation for the exclusion amount and unified treatment of gift and estate taxes.
Read More »By: Breana Behrens
The Internal Revenue Code provides that lifetime gifts and bequests in a will are taken together when determining if the value of your estate exceeds the exclusion amount, and is therefore subject to gift and estate tax.
Read More »By: Breana Behrens
The IRC section 2010(c)(2) allows for a spouse's unused portion of their exclusion amount to be added to the surviving spouse's exclusion amount.
Read More »By: Breana Behrens
The IRC provides a deduction for the value of property in a decedent's estate that that passes to their surviving spouse.
Read More »By: Breana Behrens
A charitable remainder trust (CRT) is a good tool to minimize gift and estate taxes on highly appreciable assets.
Read More »