The restrictions placed in a conservation easement are tailored to the particular property and situation. In most cases, an easement is used to preserve the natural, scenic, historic, or agricultural characteristics of the land, and to protect against inadvertent or intentional destruction of those features. For example, the easement may state that the land will remain in a natural, undisturbed condition, or it may allow some limited use, such as farming or timber management.
A conservation easement may be placed on all or a portion of your property. For instance, you may wish to protect a stream and a prairie buffer along it, and still be allowed to develop the rest of your land. The restrictions only apply to that part of your property described in the easement.
A conservation easement is permanent and binds all present and future owners of the eased land. It is recorded like any other title interest, and goes with the land whether it is transferred by sale, by gift, or by devise.
Monitoring and enforcement of the restrictions that you include in the easement is the responsibility of The Land Conservancy in perpetuity, but TLC does not own the land. You will continue to use and enjoy the land in the same way that you always have, consistent with the terms which you placed in your easement.
People grant conservation easements because they wish to protect land that is important to them, and to preserve it in an undeveloped condition for the future. Their greatest reward is the sense of satisfaction at having protected something of value. However, the financial benefits of granting a conservation easement in perpetuity can also be important.
Click here to read several stories about families that chose to work with TLC to place conservation easements on their properties.
Depending on your financial situation, a conservation easement may provide positive economic benefits in terms of income, estate, and property taxes. If you place an easement on your land, you may be entitled to a charitable contribution deduction on your income taxes based on the value of that easement. To qualify you must meet the criteria established by the Internal Revenue Service. The value of the deduction is the difference in the property’s value before and after the easement is conveyed. For example, suppose you purchased your property 10 years ago, and never built a home on it. Today, its fair market value is $60,000. After you put an easement on it, the land is appraised at $20,000. You can deduct $40,000 ($60,000 – $20,000) from your taxable income on your income tax return.
You must have a qualified appraiser determine the value of your charitable deduction. In most cases, the tax law requires that you obtain a written appraisal before the tax return is filed for the year of the deduction. A summary of the appraisal, signed by the appraiser and the conservation agency, must be attached to the return. The costs of the appraisal and any surveying or legal fees are also deductible.
If your land is part of a taxable estate, federal and state taxes may have to be paid at the time of your death. All too often, land must be sold by heirs in order to pay for these estate taxes, which may be surprisingly high because of increases in land value over time. Because the granting of an easement typically lowers the appraised value of your property, the estate taxes will be similarly lowered. This lowered tax may mean the difference between your heir’s ability to keep the property in the family and the necessity of selling the property to pay the taxes. In some cases, the reduction in value might bring the value of the estate below the tax exemption limit, and free the heirs from paying estate taxes.
If you give your land to an individual prior to your death, that individual may owe a gift tax to the IRS. If that property has a conservation easement placed on it, the tax amount due may be reduced or eliminated altogether, due to the lower value of the property.
You may also receive a property tax reduction on land with an easement. While conservation easements do not remove land from the property tax rolls, through Illinois law (P. A. 88-657) which took effect on January 1, 1995, land (outside of Cook County) that is protected by a conservation easement, and is certified by the Illinois Department of Natural Resources as demonstrating a public benefit, will be assessed at 8-1/3% fair market value, instead of the typical 33-1/3%. TLC will work with you on the application for a certificate from the state.
The conservation easement is an effective and flexible land protection tool. It allows you to retain ownership and receive tax advantages, and it represents a tangible commitment to the preservation of McHenry County’s natural heritage and rural landscape. If you are interested in learning more, please contact Kim Elsenbroek, TLC’s Land Protection Specialist by email or by calling 815-337-9502.