Ozaukee Washington Land Trust

How Can I Protect My Property?

Landowners can protect their property though conservation options offered by land trusts.

1) Conservation Easement

A conservation easement is a voluntary, legal agreement between a landowner and the Land Trust. It protects a property's conservation values by constraining allowable land uses.

Advantages of a Conservation Easement:

Landowner Retains Ownership – The Landowner retains ownership/title to the land and may continue to live on it, sell it or pass it on the heirs knowing that it will always be protected.

Flexible – They are flexible agreements negotiated with the landowner to meet the conservation desires of the landowner and protect the natural features of their land.

Permanent - They are permanent, running with the land as ownership changes.

Professional - They are written by experienced Land Trust staff and attorneys, who work with the landowner and their legal counsel, as appropriate.

Protect a Variety of Lands - They are used to protect a variety of landscapes including farms, grasslands, forests, wetlands, lakeshore and scenic and open space.

Public Benefit - They protect private lands that in turn offer the public benefit of improving water quality, providing wildlife habitat and promoting the economic sustainability of communities.

Tax Benefits - An easement donation that meets federal tax code requirements can qualify as a tax-deductible charitable donation. (Refer to the enclosed fact sheet, "What are the Tax Benefits?")

Affordable Way to Pass on Land - An easement that restricts development can lower the land's market value, which in turn can lower estate taxes and make a critical difference in an heirs' ability to keep the land intact.

Conservation Easements DO NOT:

  • Require public access on private lands.
  • Transfer ownership or management responsibilities to the Land Trust.
  • Lead to government ownership of land.
  • Remove property from the tax roll.
  • Restrict landowner's ability to sell their property.

2) Limited Development Conservation Easement

This approach is similar to the above, but allows the landowner to set aside a portion of the property for development to off-set the lost development-related revenue resulting from the easement. Under this option, a site development plan is incorporated into the easement to ensure that future development is consistent with the preservation goals for the property. The advantages noted in Option #1 above apply to this approach, as well.

3) Gift of Land

A land donation releases the donor from the responsibility of managing and caring for the land (as the Land Trust now holds title). It can provide a substantial income tax deduction and estate tax benefit for the donor, while avoiding any capital gains taxes that would result from selling the property. Donating land will also remove its value from your estate and reduce future estate-related taxes.

4) Fair Market Sale

Land Trusts, public agencies and other non-profits are often interested in buying land because direct ownership allows more control and access to protect and restore a property's natural features. However, these organizations, whether alone or in partnerships, often lack sufficient funds to buy land at fair market value. Therefore, this method of protection is often difficult to pursue unless the cost is reduced through Option #5 below. The seller would also be subject to capital gains taxes on the property's appreciated value and may incur substantial sale-related costs such as realtor's commission, which can substantially reduce profits.

5) Bargain Sale

A bargain sale is a transaction that is part sale and part gift. It involves selling property for less than the fair market value, with the remaining value being donated to the Land Trust. For example, say Mr. and Mrs. Jones own 40 acres of woodlands that the Land Trust is interested in preserving. Further, let's say that the market value of the property is $4,000 an acre and the Land Trust is unable to raise the entire $160,000. Mr. and Mrs. Jones want to preserve their woodlands but can not afford to donate the land outright because they need to receive some funds for their retirement. The solution might be a bargain sale of the property at $3,000 per acre. In this case, the Land Trust would buy the property for $120,000, which would provide sufficient resources for Mr. and Mrs. Jones retirement as well as a potential income tax deduction of $40,000. This approach reduces their capital gains tax on the sale, provides a deduction to offset the income received by the sale, and allows preservation of the woodlands.

6) Conservation Buyer Program

The Conservation Buyer Program provides a unique opportunity for a private buyer to work in partnership with the Land Trust to preserve land. Conservation Buyers agree to protect land through the following methods: i) they can acquire the land and donate a conservation easement immediately following their purchase, or ii) they can acquire the land and gift it to the Land Trust. Buyers who choose to donate a conservation easement or land under this program may also receive significant tax benefits. Conservation Buyers may also have the opportunity to purchase property that is already subject to a conservation easement, thereby significantly reducing the purchase price.

7) Remainder Interest/Reserved Life Estate

This option involves a donation of property to a Land Trust in which the landowner (or another named person) lives on the property during their lifetime. The Land Trust will obtain full control of the property when the donor or specified person dies or releases their life interest. This approach would allow the donor to continue to live on and enjoy the land without paying property taxes. Because the deed is transferred during their lifetime, the donor also has greater control over the terms of the transfer. A remainder interest gift may also entitle the landowner to an income tax deduction when the gift is made. The possibility for estate tax liability must be evaluated if the life tenant is someone other than the donor.

8) Charitable Remainder Trust

A charitable remainder trust is a land conservation technique in that it can be combined with a conservation easement, for example, to both protect land and provide funds to the trustee. A charitable remainder trust involves the donation of property by a landowner to a trust created by the landowner. The trust sells some of the land for development and donates a portion to a Land Trust to be protected. The proceeds from the sale or development are invested to generate income for the trustee beneficiary. Upon the passing of the beneficiary or expiration of the trust terms, the remaining funds in the trust are turned over to the named charitable organization – such as the Land Trust.

9) Conservation Registry Program

The Land Trust offers Registry Program agreements as a unique, flexible option to conserve private lands. The desire and commitment of a landowner to protect the natural features of their property is the basis of this program. The Registry is a formal agreement, although not legally binding, between the Land Trust and a landowner. Under this option, the owner commits to preserve and protect the land to the best of their abilities, including notifying the Land Trust of any threat to the natural features of the property. In addition, the owner agrees to notify the Land Trust of their intent to sell the property before it is placed on the market or in any other way transfer title, so that the Land Trust may have an opportunity to further discuss preservation options at that time.

10) Native Landscaping

Whether or not a landowner is able to enter into a formal preservation agreement, the Land Trust encourages all landowners to incorporate native plantings into their landscaping. Creating more natural habitats in urban and rural landscapes greatly benefits the landowner as well as wildlife. Traditional turf-based yard maintenance has many drawbacks, including significant ongoing investment in time and fuel, application of fertilizers and pesticides that negatively impact wildlife and the natural areas and water resources upon which they depend, and the degradation or destruction of pre-existing native landscapes that support wildlife. Becoming more familiar with the natural landscape potential of your own back yard leads to a greater appreciation for natural landscapes in and around your community.

Disclaimer: Potential donors should consult their tax and legal advisors to determine the tax advantages of any donation transaction.