Forever DonationBy: Resources First Foundation - RFF
A landowner recently asked us: "What is the best way to ensure that the land I donate is not sold?" We put the question to the land trust community and it generated quite a bit of activity on the land trust listserv. They provided a spectrum of ideas which range from the pragmatic to the philosophical. We have summarized and compiled their responses here and hope it will provide some good ideas and sound advice for landowners, as well as continuing this conversation among the land trust community.
It is the responsibility of the land trust to be honest and straight forward with the donor about their long-term intensions with the donated property. The land trust needs to make clear that once the land is donated, the responsibility lies in the land trust to determine what is best for the land. The land trust needs to sell itself to the donor, and if the donor is not satisfied then they should investigate other possibilities. Ultimately, the donor needs to be confident that the land trust’s mission aligns with his/her values and intentions for the donated parcel.
"You need to put your sales people on the job - Explain to the donor that your LT will preserve the property in the best way possible but once the property is donated the decision on what defines the "best way possible" is up to your LT; it's out of the donors hands. You want to focus on your expertise in these matters and reassure the donor that the property will be conserved, one way or the other whether sold/transferred/consolidated/etc..."
"The land trust should explain how the parcel fits in with their long term land protection plans (using open space plans is very helpful), why they have no intention to sell the land (if this is true) and that if they did sell land like this it would ruin their reputation such that they would never get another donated parcel and their cash donations would suffer."
"Particularly in smaller communities, the biggest factor enforcing the donor’s wishes is the potential damage to the land trust’s reputation should the community perceive that it breached the donor’s wishes. I recall a situation years ago where one the owner of land adjoining a donated parcel made it very clear to the land trust that "the neighbors will be watching what you do with this property." The message was heard loud and clear and the land trust spent about two years finding a conservation buyer after putting together use restrictions on the property. The donor’s estate had not placed any restrictions on the gift to the land trust but the land trust honored conversations it had with donor before his death."
"If a land trust doesn't feel that a property is worthy of being protected forever, then they should not accept it (unless it is an agreed-upon "trade land" to be sold). There will always be a need for wildlife habitat and natural areas, and there will always be a need for farmland for food, fiber and, perhaps, fuel."
If the donor is very concerned about the future of their property, they can engage multiple organizations, giving the fee to one and the easement to the other. Many land trusts already partner with each other to arrange such transactions.
"Have the owner donate the fee to one group/organization and the Conservation Restriction (Easement) to another similarly focused group/organization."
"The potential donor can give a conservation easement to another land protection entity and the underlying fee to the original land trust, though this involves greater complexity and expense. It does have the added benefit of helping to insulate the land from the claims of any land trust creditors. The donor should not fall into the trap of putting deed restrictions in the deed which may have an effect on the appraised fair market value of the gift for deduction purposes."
"I just wish to reinforce an earlier suggestion: have the landowner donate a Conservation Easement to one qualified conservation organization, and the fee title to another conservation organization. You should never guarantee that your land trust will always retain title, but you can assure the landowner that the property will always be protected."
The donor can also apply clauses and legal mechanisms to ensure that the land trust or organization will comply with the donor’s intentions for the land. However, some cautioned against this approach, or at least emphasized the need to be very aware of state laws, as it opens up more room for conflict in qualifying/not qualifying for tax deductions. Additionally, the donor should be advised that with a reversionary clause in particular, the heirs could decide to sell the property if the ownership is reverted back to them. Any landowner looking to go with this option needs expert, state-specific legal counsel to formulate the wording appropriately.
"A common way to deal with this is to have a reversionary clause written into the donation agreement. This is used with donations of land to public entities. The property could revert to ownership of heirs of the donor."
"Historically, the US economic and legal systems promote the free alienability of land; they discourage restrictions on land transfers. The land trust may have additional reasons why that constraint may run contrary to its own policies. You could suggest a deed with a shifting executory interest according to a condition subsequent. In other words, a back-up plan. [Simplified example: I, landowner, gift this parcel to ABC Land Trust. In the event ABC Land Trust ever ceases to exist -- or attempts to convey title to the property away to some other entity that is not a qualified subsidiary or qualified merging entity with ABC Land Trust -- then title will automatically vest in XYZ Organization.] This may not be exactly what the landowner/donor wants, but will likely have the same result, i.e., the land trust keeps the parcel, or at least ensures it doesn’t convey it away to a private party or entity with a dissimilar mission. These conditions may not be 100 percent foolproof, plus certain states may have precedent that could disregard them. An executory interest (especially a reversionary interest!) to anyone other than a qualified nonprofit would immediately disqualify the landowner/donor’s tax deduction."
"There are some who also believe that a gift of land that includes a reverter back to the donor may not be tax deductible. By reserving a reversionary interest, the donor has not given up his or her entire interest in the land—a prerequisite to taking a federal income tax deduction for the value of the gift unless the partial interest is covered by one of the statutory exceptions. Others believe that this would not be the case if the likelihood of the reverter becoming operative is so remote as to be negligible. Or it may be construed to be a di minimus interest and not affecting the gift itself. At a minimum, the restrictions included with the reverter clause may affect value even if the reverter does not defeat the gift. Legal advice with respect to the specific situation is, of course, imperative in such a situation and this, of course, is not legal advice."
"A reverter clause may satisfy the donor--but a reverter clause will not assure that the land will be protected. As long as the donor is still alive a reverter clause can be very effective. But the heirs of the donor may not have the same interest in protecting the land, especially if they are offered a substantial amount of money. I know of a couple of cases where the heirs were very willing to ‘take the money’ and allow the land to be developed."
"A very recent case involved a public golf course owned by the City of Detroit. The City was able to make a deal with the heirs to allow the prime property to be sold for development. Fortunately, other political factors came into play (the property was in a suburban community which wished to purchase the property to keep it as a public course) and the development deal fell through. However, the reverter clause would not have protected the property. Having a land trust hold the fee title may be a little more reliable, but the pitfalls are still the same. Organizations change over time--and we should not be afraid to constrain our own organizations for the public good. Besides, our mission *is* to permanently protect land."
"I hesitate to post this because it's a legal detail that the lawyers can bring up if they wish (and that I am obviously no expert on). In Michigan I believe, and a good many other states, a reverter clause is subject to the Marketable Title Act. (So are conservation easements.) This means that after 28 years (or thereabouts varying by state), the reverter clause must be re-recorded. The heirs or somebody needs to be on their toes or the interest will evaporate. If another land trust holds a conservation easement on a property owned in fee by another land trust, I expect the land trust holding the CE will re-record it. It is not so clear to me a land trust owning the fee will remember to re-record a reverter clause in favor of the heirs"
"In many states, the deed of conveyance of property may expressly create a charitable trust, which can be terminated only with permission of a court. It is not unusual for charitable donations of property (for instance, paintings given to a museum) to be made in this way, but in all instances the donee should be sure that it is willing to live up to the expectations created by such a donation. Land trusts are accustomed to taking donations of conservation easements, which many believe (including me) create a similar charitable trust relationship."
"The donor should not fall into the trap of putting deed restrictions in the deed which may have an effect on the appraised fair market value of the gift for deduction purposes."
"An outright prohibition on a sale may not be enforceable in a particular state. We suggest that the gift be conditioned in such a way that, if transferred, it has to be sold subject to stringent restrictions, including perhaps a retained conservation easement, that effectively removes the economic value from the property, thus eliminating the incentive for a sale. In other words, if someone can't build on, timber, or otherwise use the property, it isn't going to be purchased."
While the discussion as to whether it is in a land trust’s best interest to accept land that they will never be able to sell, was quite lengthy, the argument came up that if a parcel holds value to the community and has support for its conservation beyond just the land trust, then the risk of it being sold is greatly reduced.
" The highest assurance to a donor that their land will be protected by the land trust forever (however long forever is . . .) is:
1. A donation to a sustainable, well-run land trust.
2. A donation that furthers the mission and meets the land protection criteria of the land trust.
3. A donation that is accompanied by a financial contribution sufficient to ensure that the land trust can properly manage this land as a nature preserve (or however this land trust designates their fee-held lands) for the long term.
4. A donation that is important to and supported by the community.
I may be naïve, but I put more confidence in this scenario than one which doesn’t fit the above criteria but is secured by legal means. Not to say you can’t do the "belt and suspenders" thing and do both. So, I would encourage the donor to speak with the land trust directly and frankly about this donation. Have them run it through their processes to see if it even meets their criteria. Ask about their stewardship endowments. Find out their history and the future plans. Bottom line is . . . there are NO guarantees, but one has a whole lot better chance that their land will be preserved if they donate it to a local land trust (presuming they are operating well and plan to be around for the long term) than most alternatives.
One last thing, a land trust should be willing to tell the donor their intentions even though they may not be able to make guarantees, and the donor should put in writing (and not a bad idea to create a videotape as well) of their wishes in making this donation (wishes - not requirements, demands, or restrictions)."
The landowner and land trust should also be very aware of the laws of their state, as someone commented, the land may be eligible for designation as a preserve, ensuring it will not be sold or used for other purposes.
"There is another option, depending on the laws of your state. Some states provide an ability to dedicate land as a "nature preserve" or something similar whereby development rights are permanently given up. One land trust that I am familiar with has dedicated virtually all of the land that it has been given as a nature preserve. This provides donors with assurance that their land will not be sold or mortgaged. It helps to establish confidence in the community that land donations will not be diverted to other uses."