The Process
What are the steps to be taken if the property shows promise of being appropriate for an easement?
There are multiple phases:
If a tax deduction is desired, obtain a final, formal appraisal.
If a tax deduction for the value of the donated easement is desired, it’s important to involve a land appraiser, at an early stage in the process, to get a rough estimate of the value of the donated easement.
Work with the easement grantor to craft documents reflecting these agreements.
Reach an agreement in principle with the easement grantor regarding land uses to be reserved to current and future landowners and uses to be specifically prohibited.
Refine the draft documents with care, to be sure that all provisions are clear and enforceable.
Draft a baseline report that describes the features of the property in detail.
Sign and record the final documents.
Transaction Costs
What transaction costs will I incur if I grant a conservation easement on my land to AVLT?
AVLT covers the closing costs, including recording fees and title insurance. However, AVLT recommends that a conservation easement donor have the final documents reviewed by an attorney with real estate experience. This legal review will be at the owner’s expense. Also, if the donor is seeking an income tax deduction, the easement must be “valued” by a qualified appraiser. The donor bears the cost of this appraisal work.
Will I also be asked to make a cash contribution to AVLT, at the same time that I make my donation of a conservation easement?
Yes. AVLT asks each easement donor to contribute to AVLT’s Stewardship Endowment Fund. The amount that AVLT requests will vary according to the size of the parcel involved and the complexity of the easement provisions. Historically, most of the contributions have been in the range of $100-$200 per acre or more. The contribution is a one-time donation, to be made at the time the conservation easement is executed
What is the purpose of the Stewardship Endowment Fund
It is a reserve fund to cover legal expenses in case easements held by AVLT ever need to be legally enforced. The most likely scenario for this would be a subsequent property owner (not the original easement grantor) testing the limits of an easement with a proposed action or actually violating the terms of an easement.
Will my cash contribution to the Stewardship Endowment Fund be tax-deductible?
Yes.
What can I do if I want to donate a conservation easement on my land but cannot afford to make a cash contribution at the same time?
In such cases, AVLT can help potential grantors with loans. We have a small amount of money that we call our “Pioneer Fund,” set aside for this purpose. If AVLT makes a loan from this Fund, the promissory note would become due on the sale or other transfer of the property by the original easement donor.
Other Tax Issues
Is there also an estate tax benefit associated with a donated easement?
There can be. Because of the size of the estate tax exemption as of 2014, this will be of practical value only to people with sizeable estates.
What about reductions in property tax?
AVLT is not aware of any of its easement donors petitioning to have their property taxes reduced, based on covenants in their easements that have reduced the value of their property. It would be the responsibility of the easement donor to contact the Mendocino County Assessor’s Office concerning any reduction in property taxes.
