Conservation Options for Landowners

Conservation Easements

A conservation easement (or conservation restriction) is a legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land in order to protect its conservation values. It allows you to continue to own and use your land and to sell it or pass it on to heirs.

When you donate or sell a conservation easement to a local land trust or the statewide land trust known as the Maryland Environmental Trust, a statewide land trust, you give up some of the rights associated with the land. For example, you might give up the right to build additional structures, while retaining the right to grow crops. Future owners also will be bound by the easement's terms. The land trust is responsible for making sure the easement's terms are followed.

Conservation easements offer great flexibility. An easement on property containing rare wildlife habitat might prohibit any development, for example, while one on a farm might allow continued farming and the building of additional agricultural structures. An easement may apply to just a portion of the property, and need not require public access.

A landowner sometimes sells a conservation easement, but usually easements are donated. If the donation benefits the public by permanently protecting important conservation resources and meets other federal tax code requirements--it can qualify as a tax-deductible charitable donation. The amount of the donation is the difference between the land's value with the easement and its value without the easement.

Placing an easement on your property may also result in property tax savings.

Perhaps most important, a conservation easement can be essential for passing land on to the next generation. By removing the land's development potential, the easement lowers its market value, which in turn lowers estate tax. Whether the easement is donated during life or by will, it can make a critical difference in the heirs' ability to keep the land intact.

Fee Simple Acquisition

Most land trusts, with available funding, will purchase farms and forest land for the appraised market value. Often these lands are later transferred to a local government for passive or active recreational purposes or to a "conservation buyer" after deed restrictions are placed on the property limiting development potential.

Land Donation

Donating land for conservation purposes is truly one of the finest legacies a person can leave to future generations. 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.

Donating land 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 the organization will sell the land to support its 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 continue to live on and use the property. When you die (or sooner if you choose), the land trust gains 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 lifetime, 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.

Bargain Sale of Land

If you need to realize some immediate income from selling your land, yet would like the property to go to a land trust, a bargain sale might be the answer. In a bargain sale, you sell the land to a land trust for less than its fair market value. This not only makes it more affordable for the land trust, but offers several benefits to you: it provides cash, avoids some capital gains tax, and entitles you to a charitable income tax deduction based on the difference between the land's fair market value and its sale price.

Conservation and Limited Development

This common technique is used when a landowner is interested in conserving his or her property but is unwilling or unable to part with its entire economic value. Typically, the land trust works with the landowner to prepare a site plan that meets the landowner's revenue or estate planning goals while protecting important conservation values. The land trust then receives a donation of (or easement over) the portion of the site designated for conservation, while the landowner retains the development lots for sale or personal use.

This structure allows landowners to "cash in" on the value of their property without sacrificing the entire site to development and without relying on traditional middlemen such as developers. In fact, this type of limited development can sometimes be more profitable for landowners than selling their entire tract to a developer, once tax consequences and the timing of revenue streams are considered.  In addition to lower taxes, more flexibility for the landowner, the landowner may gain access to funds from government open space or farmland protection programs. After going through the site planning process, many landowners choose a more conservation-oriented plan.

When conservation of an entire tract of land is not financially possible, striking a careful balance between conservation and revenue generation can be a win-win situation for everyone.

Harford County Agricultural Preservation Program

The County easement program established in 1993, is recognized throughout the United States.  This is due to the use of innovative funding sources, payment options, and a timely manner of settlement.

To participate in the County easement program, the landowner does not have to form a district as required by the State program.  There is also no minimum acreage requirement for participation as long as the farm has operated for the past ten years and/or is located in a predominantly farming area and has development potential.

Payment options are limited cash settlements, and Installment Purchase Agreements (IPA).  (tax free income interest payments), which are used in 95% of settlements.

Applications are submitted and ranked according to a 300 point ranking system which assigns more favorable points to size, soil quality, percent of crop land, development potential, conservation practices and connection to preserved properties.  After the farm is ranked landowners are notified of their score, and they are placed on an open waiting list along with their easement price offering.

Easement price is determined by a one page easement valuation sheet which multiples the ranking items previously used on the ranking system and develops them into an easement value.  There is a cap of $12,000 per acre set on the easement payment, the average payment to date is $8,000 per acre.  The County is able to leverage these payments through the 1/2 percent real estate transfer tax funding source.  Also, for participation in the easement program, the landowner receives a 100% County property tax credit with a $35 per acre cap.

Maryland Agricultural (MDA) Land Preservation Districts.... The district program established in 1979 is a minimum commitment of five years on the applicant's part not to develop the land and keep in agricultural use.  The property must be greater than one-hundred acres in size and contain at least 50% Class I, II, or III soils.  Two or more properties may be combined to form a one-hundred acre tract, or a property may adjoin a property with an existing district and/or an existing easement.  Participants in the District Program receive a 50% tax credit from the County portion of the real estate property tax while remaining a district.

Maryland Agricultural (MDA) Land Preservation Easements.... The conservation easement is a permanent easement attached to the land restricting further subdivision and leaving it in agriculture production.  The State program does contain a very limited one time twenty-five (25) year buyout clause for unusual circumstances.  The easement allows the owner at the time of settlement the creation of two (2) acre lots for the owner, the owner's children, and existing dwellings.

The easement value is determined through a formula using real estate appraisals, agricultural land value, the owner(s) asking price, and a tabulated discounting ratio.  The farms are than ranked against each other, competing for funding allocated that granting cycle.

Maryland Rural Legacy Program.... The Rural Legacy Program is a unique approach to land conservation created to protect Maryland's best remaining landscapes and natural areas.  Through this program, greenbelts and greenways dominated by farms and forests are conserved though the voluntary purchase of conservation easements or fee estate interests in land preservation.

Your Next Step

Contact the Harford Land Trust at 410-836-2103.  We can help you arrive at a conservation plan that makes the most sense for you, and can put you in touch with attorneys, appraisers, accountants, and land planners familiar with conservation techniques.  For additional information, visit us at http://www.harfordlandtrust.org/ or contact us at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Talk with your own legal and financial advisors.

The information we have provided is for guidance and general planning purposes only. It should not be used to make decisions on specific matters. Tax advantages of easement donations will vary with individual financial situations. Consult a tax advisor or attorney for advice on how a conservation easement would affect your taxes and estate.

Read further

The Land Trust Alliance (http://www.lta.org/)  offers several publications discussing conservation techniques. They include Conservation Options: A Landowner's Guide, Preserving Family Lands, and The Conservation Easement Handbook.

For more information on Maryland conservation easements and associated tax credits, we suggest you contact the Maryland Environmental Trust at 410-514-7900 or visit their website: www.dnr.state.md.us/met/