| It may be the best conservation strategy for you if you do not wish to
pass the land on to heirs; own property you no longer use; own highly appreciated
property; have substantial real estate holdings and wish to reduce estate tax burdens; or
would like to be relieved of the responsibility of managing and caring for land. An outright
donation of land to a willing land trust releases you from the responsibility of managing
the land and can provide substantial income tax deductions and estate tax benefits (while
avoiding any capital gains taxes that would have resulted from selling the property).
Most
important, if the land is donated because of its conservation value, it will be protected.
(Although our focus here is on conservation land, commercial and residential properties
can also be donated to a land trust, with the understanding that they will be sold to
support the land trust's conservation work.)
Donating
a remainder interest in land. An outright donation is not the only way to give land. You
can continue to live on the land by donating a remainder interest and retaining a reserved
life estate. In this arrangement, you donate the property during your lifetime, but
reserve the right for yourself or any other named persons to continue to live on and use
the property (called a "reserved life estate"). You have donated to the land
trust a "remainder interest" in the property. When you or those you've specified
die or release their life interests, the land trust will have full title and control over
the property.
By
donating a remainder interest, you can continue to enjoy your land and may be eligible for
an income tax deduction when the gift is made. The deduction is based on the fair market
value of the donated property less the expected value of the reserved life estate.
Donating
land by will. If you want to own and control your land during your lifetime, but assure
its protection after your death, you can donate it by will. You should make sure the
chosen recipient is willing and able to receive the gift.
Land
donations that establish a life income. If you have land you would like to protect by
donating it to a land trust, but need to receive income during your life-time, you might
use a charitable gift annuity. In a charitable gift annuity, you agree to transfer certain
property to a charity, and the charity agrees to make regular annuity payments to one or
two beneficiaries you specify for life.
Your
gift of land usually qualifies for a charitable income tax deduction at the time of the
gift, based on the value of the land less the expected value of the annuity payments.
Another
option for donating property and receiving regular income is a charitable remainder
unitrust. You place the land in a trust, first putting a conservation easement on it if it
is to be protected. Then the trustee sells the land and invests the net proceeds from the
sale. One or more beneficiaries you specify receive payments each year for a fixed term or
for life, then the trustee turns the remaining funds in the trust over to the land trust.
The
gift qualifies for a charitable income tax deduction when the land is put in the trust,
based on the value of the land less the expected value of the payments.
Charitable
gift annuities and charitable remainder unitrusts are most useful for highly appreciated
land, the sale of which would incur high capital gains tax.
Interested
in donating land?
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