Landowners: Understanding Conservation Options
For anyone who owns a large tract of undeveloped land, the question of what to do with that land long term can seem overwhelming. As we get older, we may not be capable of maintaining it. Our children may not want the land because they live far away or they are not interested in owning or maintaining a large property. For many, land represents our most significant asset and we feel compelled to divide that asset among our children or family members. This inheritance dilemma can lead to the subdivision or sale of the land contrary to our interest in protecting or preserving the land. Different options exist and landowners should explore these options before making any final decisions regarding the succession of their land.
Under the law, property ownership or title to land is described as a bundle of sticks where each stick represents one right – the right to use, the right to sell, the right to lease or rent, etc. These different sticks can be divided in different ways at different times and among different people or entities and it is not until you have sold or given away all of the sticks that you are no longer considered the owner of the land under the law. Unfortunately, many landowners do not realize that they have all of these rights. An understanding of how these rights can be divided and the legal tools available may help resolve the quandary of what to do with your land.
You can make a donation of the land outright to a charitable organization that is equipped to assume the responsibilities of ownership. The gift can be made during your lifetime or through your will. This option may be best where you and your family live elsewhere and are no longer able to or interested in maintaining the land.
If you want to exercise some control over the land during your lifetime or into the future, you can attach certain restrictions to the land (covenants) or retain certain rights to the land (easement) when you make the donation.
If you or your family live on the land or want to continue to use it, you can donate the land while retaining the right to use it during your lifetime, or during that of your spouse, partner or child (donation or bequest with retained life estate).
If you do not want to give away the land itself but you do want to grant access to the land or the right to use the land in a particular way, you can retain title to the land and give away certain rights to use it (easements). Easements are very flexible tools that can be crafted to suit your needs and they do not affect your ability to continue to occupy or use the land, or to donate or bequeath the land. Typically the easement “runs with the land” meaning that the next owner assumes all of the rights that you have to the land while the holder of the easement continues to enjoy the rights that were given through the easement.
Another way to control the current and future use of the land is to include restrictions in the title, referred to as covenants. Covenants are promises that bind all future owners; they can be either positive meaning they require certain action or negative in that they prohibit certain activities. Homeowners associations, for example, operate almost entirely by covenants that were included in the title to the land upon the first sale and they bind all future owners. Covenants can be used in a variety of creative ways for the conservation and preservation of land and, like an easement, your right to sell, donate or bequeath your land is not affected.
Finally, there are creative estate planning tools available such as charitable gift annuities and charitable remainder trusts that allow you to derive some financial benefit from a donation of land to a charitable organization.
Many of these options can produce tax benefits for the landowner during his or her lifetime or for his or her estate through state and/or federal programs. For example, the donation of land can reduce or eliminate current property tax liability and can reduce or eliminate estate taxes. In addition, these different tools are flexible enough to be tailored to the individual landowner, to the unique characteristics of the property, your financial situation, and your family’s needs. An appropriate balance can be achieved between the desire to preserve and protect the land and the need to provide for one’s family. The North Woods Land Conservancy is happy to provide you with additional information about these options and can help you find an advisor should you wish to explore how these options might be applied to your specific situation.
