Texans are passionate about land – wide open, big land. It’s not surprising; Texas land is our abundant natural and historical heritage. But, urban sprawl and federal estate taxes are leading to an increasingly fragmented Texas. In years past there was no alternative for landowners who wanted to ensure that taxes and development didn’t fragment their legacy. Now Congress and the legislature have created a voluntary agreement known as a conservation easement. Owners of rural land have the right to protect their land, and our state’s heritage, forever while enjoying major tax benefits and even income. As leaders in this highly specialized area of law, Braun & Gresham attorneys know how to create conservation easements to meet current needs, protect land for the future, and act as a powerful estate planning tool to reduce taxes or provide income.

 

What is a Conservation Easement

A conservation easement is a contract between a property owner and a conservation organization, such as a land trust or government agency, to restrict the amount and type of development on the property. If more than one person owns the property, all owners must consent to the granting of the conservation easement. Every conservation easement has prohibited uses and permitted uses that are uniquely tailored to the particular property, and to the interests of the individual land owner. These conservation easements allow the owner to protect the wildlife habitat, open space character and other conservation values of the property without unreasonable interference with the owner’s continuing private property rights.

The rights in the land that the landowner restricts are detailed in every conservation easement. Usually the landowner gives up the right to subdivide or develop the property for commercial or residential purposes beyond a limited scope. Through the conservation easement, the owner conveys the right to enforce these restrictions in perpetuity to the qualified conservation organization. If the landowner sells the land thereafter, the new owner takes the land subject to the terms of the conservation easement. If the property is mortgaged, the lender must agree to subordinate its security interest to the interest of the conservation organization so that the conservation easement would survive any foreclosure.

If the requirements are met for donating the conservation easement under the Internal Revenue Service Code, then the donation may qualify as a tax deductible charitable gift. The value of this charitable gift is determined by an appraisal. The value of the land without any of the proposed restrictions is determined first. Then the appraiser determines the value of the land after the restrictions are put in place. The difference between these two values represents the value of the conservation easement. If the conservation organization pays any cash to the landowner as part of the transaction then the value of the donation is decreased.

The total reduction in fair market value reduces the value of the property for federal estate tax purposes. Conservation easements are one of the most powerful estate planning tools for landowners to use to reduce or eliminate their federal estate tax liability, while maintaining many of the benefits of owning the land. Our firm often works together with our client’s tax and estate planning attorney, accountant, and investment advisers to coordinate this strategy to meet the client’s goals.

The charitable donation of a conservation easement produces significant income tax benefits.

Donated Conservation Easements

Donation of a conservation easement is the most effective tool commonly available to landowners who want to keep their land undeveloped. These voluntary agreements to conserve the land are negotiated and donated to qualified conservation organizations with the power to enforce them in perpetuity. Landowners receive major income and estate tax benefits, while achieving their goals for their land. Braun & Gresham attorneys have been successfully representing landowners through this complex process for years.

Sale of Development Rights

Environmental features once thought of as liabilities can now be very valuable for landowners who do not want to sell or develop their land. Features like streams, wetlands, caves, sinkholes and endangered species habitat in the right locations can be preserved and managed under conservation easements that are sold for substantial payments. Braun & Gresham has a successful track record of identifying and selling these valuable features while helping families keep their land for recreation and agriculture.

IRS Audits

Since donated conservation easements result in significant tax benefits, those benefits are sometimes audited by the Internal Revenue Service. Braun & Gresham has developed winning strategies for defending landowners whose tax benefits are challenged. The best strategy of all is the thorough and professional job that Braun & Gresham does in handling the original transaction so there is nothing to challenge. However, we have also helped many clients who didn’t call us until after they were audited.

General Information

A conservation easement can be an important tool to:

  • retain private ownership of land
  • conserve wildlife habitat, open space and other conservation values
  • protect productive agricultural land
  • preserve valuable family land as a legacy for future generations
  • maintain the scenic areas and the rural character of land in the path of development
  • preserve land which is historically important
  • reduce property taxes
  • reduce federal estate taxes
  • reduce income taxes
  • reduce capital gain taxes
  • shift greater financial value to future generations

Estate Planning

Having an updated and thorough estate plan is crucial when considering, or going through with a conservation easement. Trusts are usually set up to keep the land protected and taxes low for years to come. Having a solid estate plan ensures there are no discrepancies in the intent of the will, and lays out a game plan that future generations can count on.