Protection Methods
Thumb Land Conservancy Land Protection Methods
There are several ways that a landowner can protect their land while realizing
certain benefits. The easiest methods for all parties are land donations to a
conservancy and conservation easements. Other more elaborate methods, such
as charitable remainder trusts, charitable gift annuities, and life leases or
reserved life estates require more effort to set up and administer, but could
result in significant benefits to the landowner.
Before making any conclusions, you should contact the land conservancy to
discuss the details. Some protection methods have some up-front costs for legal
agreements, surveying, property closing, and so on. Most land conservancies
request a financial endowment along with a land donation or conservation
easement to pay for monitoring, stewardship, and other potential costs.
However, the TLC is often able to work with landowners who cannot afford these
costs.
Land Donation
The landowner donates their land to a land conservancy during their lifetime
through a standard warranty deed.
Understandably, most landowners are not in a rush to give away their land.
However, it may make sense for some to transfer ownership to a land
conservancy. The immediate benefits to the land donor are that they will stop
paying property taxes and they will also eliminate their liability associated with
the land. They may also claim an income tax deduction based on the appraised
value of the land. In addition, the TLC can grant lifetime access to a the land
donor so that they can still enjoy the property for passive recreation. Land
donors eliminate capital gains taxes and the donor’s heirs avoid estate taxes.
Best of all, a land donor can rest assured that their property is both legally and
physically protected as a natural area by a land conservancy, essentially forever.
If the TLC ever ceases to exist, our bylaws require that all properties be passed
on to another land conservancy or similar organization that will continue to
protect the land. The donor also establishes a legacy that will be passed on
through the preserve name, media coverage, and TLC publications.
Donation by Trust or Will
The landowner donates their land to a land conservancy through a trust or will.
This method results in many of the same benefits to the landowner as an
immediate warranty deed donation. However, disadvantages of donating
through a trust or will are the up-front legal costs of assuring the trust or will
guarantees a trouble-free transfer to a conservancy, and that the landowner
continues to pay property taxes, cannot claim income tax deductions, remains
liable for the property, and the donor’s heirs may still be liable for some estate
taxes. While the landowner continues to own and control the land during their
lifetime, they do not benefit from the stewardship provided by a conservancy.
Regardless, if set-up properly, the landowner can rest assured that their property
will be protected in the future, and they will establish a legacy that will be passed
on through the preserve name, media coverage, and TLC publications.
Reserved Life Estate
The landowner donates a remainder interest in the land to a land conservancy
through a reserved life estate agreement, allowing them to continue owning,
living on, and using the land through their lifetime. Upon death, the life interest
of the owner is released to the conservancy, which then has full ownership.
As with an immediate warranty deed donation or donation by trust or will, the
landowner can realize various financial benefits. But like donating through a
trust or will, disadvantages are the up-front legal costs of assuring the reserved
life estate guarantees a trouble-free transfer to a conservancy, and that the
landowner continues to pay property taxes, cannot claim income tax deductions,
remains liable for the property, and the donor’s heirs may not avoid some estate
taxes. While the landowner continues to own and control the land during their
lifetime, they do not benefit from the stewardship provided by a conservancy.
Regardless, if set-up properly, the landowner can rest assured that their property
will be protected in the future, and they will establish a legacy that will be passed
on through the preserve name, media coverage, and TLC publications.
Conservation Easement
The landowner donates a conservation easement over all or a portion of their
land to a conservancy. A conservation easement is a legal agreement to protect
the land in perpetuity by restricting development rights. Although the agreement
is referred to as an easement, it does not give the public the right to access the
property. Through agreement with a conservancy, conservation easements can
be tailored to the specific preferences of the landowner, allowing for minor
impacts such as hunting, trails, firewood gathering, even small structures, and
farming on agricultural land. The land conservancy enters the easement
property once each year to monitor conditions and adherence to the easement
agreement.
Unlike an immediate warranty deed donation, the conservation easement donor
continues to own the land. The conservation easement does not restrict the
landowner from selling the property or leaving it heirs. However, all future
landowners must abide by the terms of the conservation easement restrictions.
A major benefit of a conservation easement is that, upon sale or transfer, the
property tax on that portion of land under easement remains capped.
Depending on the easement donor’s tax situation, they may be able to claim a
federal tax deduction based on the appraised value of the land, which can be
deducted over a period of 15 years. The donor can also request a property tax
reduction from the local tax assessor, based on the value of the potential
development rights that are restricted by the easement. Potential property tax
reductions depend entirely on the local assessing authority and are quite
variable. Disadvantages of conservation easements are potential up-front costs
of the conservation easement documents, legal review, and land survey,
although there may be ways to avoid some of these costs. Other disadvantages
are that the landowner continues to pay property taxes, cannot normally claim
income tax deductions for the full value of the land, remains liable for the
property, and the landowner’s heirs are still liable for some estate taxes. The
owner also does not receive the full benefit of land stewardship provided by a
conservancy. Regardless, if set-up properly, the landowner can rest assured that
their property will be protected in the future, and they will establish a legacy that
will be passed on through the preserve name, media coverage, and TLC
publications.
Bargain Sale
The landowner sells land to a land conservancy at a significantly reduced price
and may claim an income tax deduction based on the appraised value of the
land. Donation of land subject to mortgage can also considered a bargain sale
for income tax purposes, as though the conservancy paid the amount due.
The benefits of a bargain sale are obviously that the seller receives some
revenue and the land conservancy pays less to preserve a natural area. Like a
warranty deed donation, the seller will stop paying property taxes and they will
also eliminate their liability associated with the land. They may also claim an
income tax deduction based on the difference between the appraised value of
the land and the sale price. In addition, the TLC can grant lifetime access to a
the land donor so that they can still enjoy the property for passive recreation.
Sellers may also reduce their capital gains taxes, and their heirs avoid estate
taxes. Best of all, the seller can rest assured that their property is both legally
and physically protected as a natural area by a land conservancy, essentially
forever. If the TLC ever ceases to exist, our bylaws require that all properties be
passed on to another land conservancy or similar organization that will continue
to protect the land. The donor also establishes a legacy that will be passed on
through the preserve name, media coverage, and TLC publications.
Alternative Land Protection Methods
There are some alternative land protection strategies that could benefit
landowners and even provide income. These methods are not nearly as simple
as donations or conservation easements in protecting land, but might be
considered when a landowner needs income and is not quite ready for full
preservation.
Wetland Mitigation
The landowner is paid by wetland permit holder to place a State conservation
easement on their wetland as mitigation for permitted impacts at another
location.
Wetland mitigation is completely subject to agency approvals, usually involving
the Michigan Department of Environment, Great Lakes, and Energy, United
States Department of Agriculture, Natural Resources Conservation Service, or
United States Army Corps of Engineers. For preservation of existing natural
wetland as mitigation, the wetland must be rare or imperiled, of high quality, or
serve an exceptional ecological function. Restoration of wetland is another
possible type of mitigation, usually what is known as a wetland mitigation bank.
However, a large investment of funding and labor is required up-front before
agencies approve wetland banks for sale of mitigation credits.
Wetland mitigation areas are generating significant revenue for landowners
across Michigan and the United States, typically several thousand dollars per
acre of mitigation credit. However, there are a lot of up-front costs and long-term
management costs that are dictated by regulatory agencies. Because all
wetland mitigation areas are placed under conservation easement, the
landowner could receive all of the same benefits as a donor of a conservation
easement to a land conservancy. The landowner can continue to own the land
through their lifetime and may be able to generate additional income from the
property by leasing it out for hunting or other passive uses. In addition, the land
would be protected under a State of federal conservation easement that could
potentially be better enforced than one held only by a land conservancy. TLC
staff have been involved in several properties preserved as wetland mitigation
and the landowner can benefit from our experience.
Deeded Access
The landowner is paid, usually by adjacent landowners, for limited or full access
to their land. The right of access can be recorded with the register-of-deeds. For
example, adjoining or nearby neighbors could pay the owner of a woodlot or
other natural area to use as a park for passive recreation such as walking,
nature observation, cross-country skiing, and other limited activities. This
method is very similar to deeded access to private lakes. The right to access the
land is fully transferable to new buyers.
This method has many potential variables that could benefit the landowner and
probably works best where there are not similar natural areas or parks within
walking distance. Based on demand, significant revenue could be generated for
the landowner. A portion of that revenue could be used to pay for the costs of a
conservation easement, which would then provide the associated benefits
previously described. The revenue could also be used to fund the purchase of
the land by a conservancy, which would then result in the many benefits of
conservancy ownership. The property values of adjacent or nearby landowners
with deeded access are likely to increase because of their exclusive right to
access what essentially becomes a local private park. Disadvantages to the
landowner include increased liability and having to deal with incompatible uses
of the area. However, the responsibility for these problems would shift upon
transfer of ownership to a land conservancy, neighborhood association, or
similar group. Perhaps the most rewarding benefit of deed access is providing a
place in or near a neighborhood where residents, and especially children, can
easily enjoy passive outdoor recreation in a natural setting.
Access and Use Leases
The landowner receives lease payments on an annual, seasonal, or monthly
basis for access and restricted use of their land. Typically, land is leased for
hunting or farming in Michigan, but could be leased simply for passive recreation
such as walking, nature observation, and cross-country skiing, or heavier uses
such as collection of wild herbs, berries, nuts, and mushrooms, fishing, hunting,
camping, horse riding, mountain biking, and other uses as determined by the
landowner.
As with other protection methods, there are many potential variables that could
benefit the landowner and probably works best where there are not similar
public natural areas nearby.
Access and Use Fees
In the same way that a landowner could receive lease payments for access or
restricted use of their land, they could charge access or use fees on a daily or
per-use basis. This method is more administratively difficult than leasing, but
avoids a long-term commitment by the landowner and may be more attractive to
lower income users. Again, this method could be used for passive recreation
such as walking, nature observation, and cross-country skiing, or heavier uses
such as collection of wild herbs, berries, nuts, and mushrooms, fishing, hunting,
camping, horse riding, mountain biking, and other uses as determined by the
landowner.
As with other protection methods, there are many potential variables that could
benefit the landowner and probably works best where there are not similar
public natural areas nearby.
Preserve Club
The landowner joins with other individuals to form a club or association in which
all members share access and use of the property. Access or use rights can be
sold as annual memberships, shares, or other ways. As with lease or fee
strategies, the organization could allow fishing, hunting, camping, horse riding,
and mountain biking, or more passive recreation such as walking, nature
observation, cross-country skiing, and other uses.
As with other protection methods, there are many potential variables that could
benefit the landowner, and probably works best where there are not similar
public natural areas nearby. If the group establishes itself as a non-profit
organization, there could be significant tax benefits.
Sustainable Resource Extraction
The landowner receives income from sustainable resource extraction or uses
compatible with the natural area. Resource extraction activities could include
collection of medicinal or edible plants, berries, nuts, and mushrooms, collection
of seeds and transplants for restoration of other areas, sustainable cutting of
firewood or harvest of timber, and uses such as nature observation, field trips,
nature-related training, fishing, hunting, camping, and other activities.
Depending on the natural resources available and effort, landowner revenue can
be highly variable. As with other protection methods, there are many potential
variables that could benefit the landowner and probably works best where there
are not similar public natural areas nearby. If the group establishes itself as a
non-profit organization, there could be significant tax benefits.
TLC Naturehoods
You can help not only the TLC in its mission of protecting natural areas, but also
the entire world by creating or restoring natural habitat on your property. The
TLC Naturehood certification program recognizes natural areas restored using
locally endemic seed and plant stock. We can also certify created natural
habitats that do not necessarily represent the original native and endemic
community, but which still benefit wildlife and the environment. We are also
happy to provide you with advice on restoring, creating, and maintaining native
habitats, and by connecting you with information and resources. Contact us for if
you have questions or seek certification.
