CONSERVATION EASEMENTS

What is a Conservation Easement?

A conservation easement is a voluntary legal agreement between a landowner and a conservation organization, such as the Bluegrass Conservancy, which permanently protects productive agricultural land, historic sites, scenic views and natural resources. Conservation easements are flexible documents tailored to each property and the needs of individual landowners. They may cover an entire parcel or portions of a property. Conservation easements are granted by landowners ("grantors") who authorize a qualified conservation organization ("grantee") to monitor and enforce the restrictions set forth in the agreement.

Easements are tailored to the circumstances

Each easement is tailored to the property in question, the resources to be protected and the desires of the landowner. The landowner works with the prospective grantee to decide which activities should be limited to protect the important resources of the individual property. The restrictions must be adequate to protect the resources and meet Internal Revenue Service standards. In most cases, a conservation easement limits future use of the property to agricultural and open space uses. Some limited rights to build additional residences for family members or employees may be permitted.

Property Remains in Private Ownership

After granting a conservation easement, landowners retain title to their property and can still use the property for farming, restrict public access, use the land as collateral for a loan, or sell or transfer title to the property subject to the terms of the agreement. Future owners of the property are subject to the easement agreement. Easements are especially suitable for the Bluegrass region, where it is desirable to protect productive farmland essential to the equine industry and other general agricultural operations.

Valuation

Landowners may donate a conservation easement to a qualified conservation organization such as the Bluegrass Conservancy or a governmental body. In either case, it is important to determine the value of the easement. The value of a donated easement is determined by comparing the value of the property before the easement and after the easement restrictions are placed on the property. Landowners must substantiate the asserted value by providing an independent appraisal which meets federal standards. In general, more restrictive agreements and intense development pressure result in higher easement values. In order to qualify for the favorable tax benefits, donated conservation easements must be perpetual in duration.

Benefits

Conservation easements permanently protect productive farmland while keeping the land in private ownership and on local tax rolls.

Conservation easements are flexible, and can be tailored to meet the needs of individual landowners and unique properties.

Qualified conservation easements provide landowners with several potential tax benefits including income, estate and property tax reductions.

By reducing estate taxes, conservation easements help landowners transfer their operations to the next generation.

Other Considerations

Although conservation easements can prevent residential or commercial development of agricultural land, they do not ensure that the land will continue to be actively farmed. They do ensure that the land will be available for farming in the future.

Conservation easements must be carefully drafted to ensure that the terms allow farmers to adapt and expand their operations and farming practices to adjust to changing economic conditions.

Donating a conservation easement is not always a financially viable option for landowners. Publicly funded farmland preservation programs such as the Purchase of Development Rights program in Fayette County provide landowners an opportunity to sell conservation easements to protect farmland.

Monitoring and enforcing conservation easements requires a serious commitment on the part of the grantee organization because subsequent landowners are not always interested in upholding easement terms. The Bluegrass Conservancy requests an endowment contribution to ensure adequate resources are available, if needed.

What are the costs of donating a Conservation Easement?

A conservation easement is a legal agreement which is intended to protect property in perpetuity. Its preparation requires the input of many professionals. Landowners are encouraged to consult with their legal and tax advisors when donating a conservation easement. A landowner should anticipate some expenses in donating an easement including the costs of lawyers, accountants, appraisers and other advisors.

How does a landowner start?

If you would like to talk to a Bluegrass Conservancy professional about planning for the future of your farm, please contact us at (859) 255-4552.