There are several ways a person can ensure their property is protected in the future from undesirable development. Each property protection mechanism has a variety of ways it could be implemented as well as strengths and weaknesses associated with it. Mid-Michigan Land Conservancy can provide advice on the strengths and weakness of each mechanism and how it could be applied to any given property. Ultimately, however, the property owner must decide what they are trying to achieve and the best way to reach their goals. Landowners should consult their own legal and financial advisers in addition to consulting information supplied by Mid-Michigan Land Conservancy.
When a person owns property they own the rights associated with the property. For example, they own the right to dig for minerals, to allow access to others, to build on the land, to farm the land, to harvest timber, etc. The owner may use an easement to give up certain rights to another person or entity. One example of an easement is giving access to the property to an utility company so they can check a meter or work on power lines. The owner still owns the property and all the remaining rights of the property.
In a conservation easement, the owner gives up rights that could affect the conservation or agricultural values, or both, of a property. Conservation easements are designed to protect the conservation and agricultural values of a property while the property remains in private ownership. Typically rights such as the right to subdivide or the right to develop are given to qualified accepting organizations. When the conservation easement is given to a qualified 501(c)(3) organization, the IRS recognizes the easement may reduce the value of a property and considers the lost value as a charitable donation.
A conservation easement is a legal document that is recorded with the county recorder, typically the Registered of Deeds in Michigan. For the IRS to recognize the conservation easement as a charitable gift, the easement must be given in perpetuity. While the easement donor may sell or give the property to another person, the conservation easement stays with the land. All future owners of the property must abide by the terms of the easement.
A conservation easement is a detailed document. A Baseline Document, recording the condition of the property at the time of the easement, must be completed and signed at the time the easement is recorded. A conservation easement typically takes several months to complete.
Fee simple donation
In a fee simple donation, the property owner donates the property to a conservancy. The donation can take several forms. It can be an outright donation while the owner is still living. Alternatively the donation could be done through a will at the death of the donor. Another option, called a remainder interest, allows the property to be donated immediately but the donor resides on or utilizes the property for their lifetime.
When the property is donated to a qualified 501(c)(3) organization, this qualifies it as a donation to a charitable organization. The donation may qualify as a deduction on your federal income taxes. The donor must consult with their own advisors to determine the value of the donation. The conservancy may not take part in valuing the donation.
In a bargain sale, the property is sold to a conservancy for significantly less than the market value of the land. The difference between the market value and the bargain sale value may be considered a charitable donation.
Conservation Donation Rules
There can be Federal, State and local tax advantages to property owners who conserve their land. We suggest you consult with your own legal and financial advisers. To obtain an overview of the benefits and issues, we recommend reviewing the material on the Land trust Alliance website at: http://www.landtrustalliance.org/policy/tax-matters/rules/conservation-donation-rules