Outright Donation (Fee Simple Transfer)
Giving the land to a non-profit conservation organization or to a government agency is the simplest way to protect land. It is only necessary to obtain acceptance from the agency or organization to which the land will be donated, prior to deeding the land. A gift ensures long-term protection of the land. The donor receives tax benefits in the form of federal income tax deductions, potential estate tax benefits, and relief from property taxes. The donor is relieved of management responsibilities, and automatically absolved of liability associated with any trail use.
About 80 percent of the properties preserved by land trusts on Cape Cod were donated. About 30 parcels per year are donated outright in this manner. Typically, the only cost to the land donor is for an appraisal, which certifies the value of the donated land for federal income tax deductions. Appraisals are needed when the claimed value of the deduction is more than $5,000. Land trusts usually ask donors to pay remaining property taxes on the land before it becomes tax exempt in the next fiscal year.
Donation by Will (Bequest)
A gift of land made through a will entitles the donor to retain full use of the land during his or her lifetime and assures that it will be cared for in the future. It is advisable to discuss the gift with the agency or organization prior to inclusion in a will, to ensure a plan for the care of the land. The donor is responsible for real estate and income taxes for the property during his or her lifetime; however, removing the land from an estate reduces inheritance taxes.
Combined, Cape Cod land trusts typically acquire one property per year via bequests. These properties tend to be large and valuable, often part of a family’s estate. In 1993, Barnstable Land Trust acquired a large coastal woodland fringed with salt marsh through a bequest. The donation lowered the value of the family estate by about $1 million, enabling the family to retain most of the remaining land, rather than selling it for development to pay high inheritance taxes.
Donation with a Reserved Life Estate
A donation with a reserved life estate may be made to a government agency or conservation organization. The donor retains the use of the land during his or her lifetime, and the lifetimes of specified family members. A reserved life estate ensures that the land is protected in perpetuity, yet allows the donor to reside on it and maintain the land. The tax advantages with a retained life estate are less than those with an outright donation.
In 1993 a family donated five acres of dune and salt marsh to the Truro Conservation Trust, while reserving the right to use the parcel for family boating and beach bathing during their lifetimes. The reserved right slightly lowered the value of the land gift.
Gifts of Other Properties
Many conservation organizations and agencies will accept a gift of property with little or no environmental value, sell it on the open market (with restrictions, if appropriate), and use the money for the preservation of other ecologically significant lands. The landowner is eligible for the same tax benefits as a gift of conservation land.
This option has been rarely used on Cape Cod. In 1988, the Brewster Conservation Trust received a gift of title to a time share unit in a local condominium. The Trust sold the unit for $2,000 and put the money toward the purchase of the Windmill Meadows parcel. The donor received a tax deduction for the value of the time share unit.