Estate Tax Benefits
Estate Taxes & Conservation Easements
The Federal government has created powerful incentives to promote land conservation by landowners and their heirs. Conservation easements can result in significant estate tax savings for heirs of land.
If a landowner places a conservation easement on their land and subsequently dies, the value of the property is included in his gross estate at its easement restricted value. Without the easement, the land would be valued for estate tax purposes at its unrestricted value (which can be much higher). This alone is a powerful incentive for landowners to create conservation easements.
A 1997 tax law increased (in some cases, dramatically) the amount of estate tax savings. This law allows landowners to deduct up to 40% of the value of all land under a conservation easement as long as the easement was donated by the landowner or a member of his family and was owned for 3 years prior to death. This can provide up to an additional $500,000 reduction in the value of land under easement for estate tax purposes. (There are also slight limitations imposed where the value of the conservation easement does not reduce the overall value of the land by at least 30%.)
These incentives may lower or eliminate the estate taxes on a property and allow land to remain in the family rather than being sold to pay estate taxes. These are especially relevant incentives for farmers and landowners that are “land rich” and “cash poor.”
With ever changing Estate Tax laws it is important to check with tax lawyers and experts to get appropriate advice when considering conservation easements and estate tax benefits.