Donating land for conservation purposes is truly one of the finest legacies a person can leave to future generations. It may be the best conservation strategy for you if you do not wish to pass the land on to heirs, own property you no longer use, own highly appreciated property, have substantial real estate holdings and wish to reduce estate tax burdens, or would like to be relieved of the responsibility of managing and caring for land.
Donating land releases you from the responsibility of managing the land and can provide substantial income tax deductions and estate tax benefits, while avoiding any capital gains taxes that would have resulted from selling the property. Most important, if the land is donated because of its conservation value, it will be protected. (Although our focus here is on conservation land, commercial and residential properties can also be donated to a land trust, with the understanding that the organization will sell the land to support its conservation work.)
Several donation options exist for land owners:
Donating a remainder interest in land
An outright donation is not the only way to give land. You can continue to live on the land by donating a remainder interest and retaining a reserved life estate. In this arrangement, you donate the property during your lifetime, but continue to live on and use the property. When you die (or sooner if you choose), the land trust gains full title and control over the property.
By donating a remainder interest, you can continue to enjoy your land and may be eligible for an income tax deduction when the gift is made. The deduction is based on the fair market value of the donated property less the expected value of the reserved life estate.
Donating land by will
If you want to own and control your land during your lifetime, but assure its protection after your death, you can donate it by will. You should make sure the chosen recipient is willing and able to receive the gift.
Land donations that establish a life income
If you have land you would like to protect by donating it to a land trust, but need to receive income during your lifetime, you might use a charitable gift annuity. In a charitable gift annuity, you agree to transfer certain property to a charity, and the charity agrees to make regular annuity payments to one or two beneficiaries you specify for life. Your gift of land usually qualifies for a charitable income tax deduction at the time of the gift, based on the value of the land less the expected value of the annuity payments.
Another option for donating property and receiving regular income is a charitable remainder uni-trust. You place the land in a trust, first putting a conservation easement on it if it is to be protected. Then the trustee sells the land and invests the net proceeds from the sale. One or more beneficiaries you specify receive payments each year for a fixed term or for life, then the trustee turns the remaining funds in the trust over to the land trust. The gift qualifies for a charitable income tax deduction when the land is put in the trust, based on the value of the land less the expected value of the payments.
Charitable gift annuities and charitable remainder uni-trusts are most useful for highly appreciated land, the sale of which would incur high capital gains tax.
Bargain Sale of Land
If you need to realize immediate income from selling your land, yet would like the property to go to a land trust, a bargain sale might be the answer. In a bargain sale, you sell the land to a land trust for less than its fair market value. This sale not only makes it more affordable for the land trust, but offers several benefits to you: It provides cash, avoids some capital gains tax, and entitles you to a charitable income tax deduction based on the difference between the land’s fair market value and its sale price.
For more detailed information about land donation options, please see the Resources section, which provides many helpful links to land conservation organizations. Or Contact the BCTrust. We are happy to either provide you with more information to help you arrive at a conservation plan that makes the most sense for you or refer you to another land trust organization.