Preserving land through a voluntary conservation easement agreement can be a remarkable gift to your community.If you are interested in pursuing such a gift on your land, consider the following steps:
Step 1: Determine Eligibility
- Learn about conservation easements by contacting your local land trust and an attorney familiar with conservation law.
- Schedule a site visit with the land trust to determine if your land is eligible to be conserved under easement.
Step 2: Set Financial Goals
- Discuss any transaction costs that may be required to complete the deal, as well as potential tax benefits for a qualified donation.
- Talk with your family and a qualified accountant to decide if a conservation easement fits with your family and financial goals.
- Identify your property’s potential conservation values; decide what you would like to see preserved.
Step 3: Obtain an Appraisal
- Obtain a title commitment (or ownership and encumbrances report) to determine the status of ownership, mortgages, mineral interests, water rights, and other encumbrances on your land.
- Note that mortgages or liens must be subordinated to the conservation easement in the event that a property is subject to a mortgage (your land trust can help you do this).
- In addition, if the mineral rights are severed, the IRS requires a geologist to complete a mineral assessment detailing the likelihood of surface mining on the property.
- Finally, in order to claim Colorado conservation tax credits, the easement property must be owned by a qualified taxpayer.
Step 4: Determine Tax Benefits
- Obtain a real estate appraisal that compares the “before” value of the land to its value after creation of the easement in order to determine the value of the gift for IRS tax purposes.
- Consult with a tax advisor or attorney regarding the financial and legal implications of placing your land under easement.
- If your easement is eligible for Colorado conservation tax credits, determine whether or not you would like to sell these credits or use them yourself.
- Notify your land trust and register with any tax credit brokers early if you decide to sell your credits.
Step 5: Prepare a Deed of Conservation Easement
- Prepare a deed of conservation easement in cooperation with the land trust – both sides should have legal counsel. Recognize that there are costs for the project for an appraiser, a consultant to prepare a baseline documentation report (as required by the IRS), and legal and financial advisors. Additionally, the Trust may charge for its technical services and you will be asked for a voluntary contribution to assist the Trust’s perpetual obligations to steward the property and defend the easement.
- Obtain a baseline inventory of the property to document the conservation values and ecological status of property at the time of donation. Sign and record the deed of conservation easement.
Step 6: Monitor Your Conservation Easement
- Look for an annual monitoring visit from the land trust to verify that the easement is being honored.
- For more information on monitoring, contact us at email@example.com.