Lower Merion Conservancy

Donating Your Land

Donating your land to a conservation organization or government agency is the most straightforward way to ensure that your land is permanently protected and properly managed in the long run. The private land conservation movement in the U.S. was started in just this way—by generous landowners concerned about the future of their property and community.

When you donate your land, you transfer full title and ownership to the recipient. As with any donation, you will be eligible for a federal income tax deduction which can be of substantial financial benefit. And, although you are transferring title to a nonprofit organization, you may still be able to live on the property. As you will see, there are several ways that land donation can meet both your conservation and financial goals.

The explanations and examples below represent only the most common conservation tools—there may be other techniques or combinations of techniques that better meet your goals. Please remember that Lower Merion Conservancy does not offer legal or financial consultation and that we present the information below for illustrative purposes only. Please speak to your personal advisors before engaging in any conservation transaction.

Outright Donation

In the most basic form of donation, full fee interest in a property is transferred to a conservation organization or government agency. This qualifies the donor for a federal income tax charitable deduction for the fair market value of the property as determined by a qualified appraiser.

Example: The owner of a 40-acre parcel containing rare and endangered species is willing to give the property to a land trust. The land is valued at $400,000. The owner/donor receives a $400,000 deduction for federal income tax purposes. This deduction could produce tax savings of as much as $160,000.

Donation with Life Estate

If you are interested in donating your land for conservation purposes but still want to live there, donation with a life estate can be a solution. Generally, the property owner reserves the right to continue to live on the donated property until some triggering event (usually when the property owner moves from the property or dies) conveys possession of the property to the recipient organization.

Example: A landowner with a house on 40 acres of land wishes to live there as long as possible, but has no heirs and would like the land to remain open after she dies. She give the land to a local watershed conservancy, but reserves the right to live there for the rest of her life. She receives a federal income tax charitable deduction that is calculated using Internal Revenue Service tables that consider her age and life expectancy and give a percentage that represents the value of the girt. If this donor is 65, the percentage may be about 33%. Thus, if the land is worth $200,000, the gift would produce a charitable deduction of approximately $66,000.

Bequest

You may also donate your property through your will or living trust. This allows you to maintain full control of the land during your lifetime. When land is donated through bequest, the donor’s estate receives an estate tax charitable deduction for the fair market value of the property, thus reducing estate taxes that are often substantial.

Example: A landowner with a parcel in an important watershed wants her land to be responsibly managed and left undeveloped after she dies. She tells her attorney that she wants to leave the land to the local township. The attorney adds this bequest to the donor’s will. When the owner dies, the township inherits the land and the landowner’s estate tax liability is reduced because the charitable deduction removes the value of the land from the estate.

Asset Property

Perhaps you own a fairly small property that has been in the family for years and you can’t bear the idea of it being subdivided into smaller lots in the future. While you land may not be a high priority for protection by a land trust, you may still be able to leverage it for substantial conservation and tax benefit. In this case, the landowner donates the property to a conservation organization that, in turn, places a conservation easement on it restricting future development. The organization then sells the property and uses the proceeds to support other conservation projects. The landowner may be entitled to a federal income tax charitable deduction for the value of the property.

Example: A couple with a home on five acres worth $450,000 does not wish to stay in the home any longer and none of their children plan to live there in the future. The couple makes an unrestricted gift of land to a land trust and receives a tax deduction equal to the full value of the property. The land trust places a conservation easement on the property, reducing the value to $250,000. After the trust sells the property, it sets aside $10,000 in an endowment to fund future easement monitoring and uses the remaining $240,000 to support other conservation projects.

Supporting the Ongoing Costs of Land Management

Once you have donated your land for conservation purposes, the recipient organization must cover the cost of managing the land in perpetuity. Because these organizations are either nonprofit or governmental, they will likely need a source of funding to support these costs. This is why it is important to consider providing an endowment along with the gift of land.

The size of this endowment will depend on the size and features of the land. An endowment will depend on the size and features of the land. An endowment can be established using other assets, like securities, cash or other real estate. Some landowners have used life insurance to fund an endowment. When there is no other source of endowment available, a recipient organization may create one by subdividing off a small piece of the protected land—an “endowment lot”—and using it as an asset property. Proceeds from the sale of the asset property are used to establish the endowment.

Donation Options

Conservation Technique

Retain Ownerships?

Live on the Land?

Tax Benefit? *

Income?

Outright Donation

No

No

Yes (charitable deduction)

No

Donate with Life Estate

No

Yes

Yes (smaller charitable deduction)

No

Bequest

Yes
(until death)

Yes

Yes (reduce estate taxes)

No

Asset Property

No

Optional

Yes (charitable deduction)

No
* Tax benefits should accrue in most cases; however, your personal financial situation will determine how much, if any, reduction you ultimately receive. Lower Merion Conservancy is not a legal or tax advisor. You will need to speak to your personal advisors.

Updated: 9/22/2006 © 2010Lower Merion Conservancy. All rights reserved.

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