What is the Lord Berkeley Conservation Trust?
The Lord Berkeley Conservation Trust (LBCT) is a local nonprofit organization that is dedicated to protecting in perpetuity the important natural, cultural, and open space resources that anchor our sense of place in and around Santee Cooper Country.
What is a conservation easement?
A conservation easement is a voluntary legal agreement between a landowner and Lord Berkeley Conservation Trust that permanently limits certain uses, such as the right to extensively subdivide and develop the property. It is the most common tool that Lord Berkeley Conservation Trust uses to conserve important lands.
Is a conservation easement customizable to my particular needs?
Yes. Voluntary conservation easements vary widely and are highly customizable. For example, an easement to protect rare wildlife habitat might prohibit any further development whatsoever, while one to protect the scenic and historic values of a farm might allow continued farming and the building of agricultural structures. Landowners typically reserve additional rights consistent with the conservation goals for the property, such as the right to build a limited number of residences, hunting and fishing rights, and the right to harvest timber in accordance with best management practices.
What can I do with my land after I put it under conservation easement?
Landowners retain all rights in the property other than those that are specifically surrendered through the conservation easement or that otherwise impair the conservation values of the land. LBCT works in partnership with landowners to ensure that those values are preserved while being sensitive to their needs.
Is a conservation easement permanent?
Yes. A conservation easement is a restriction placed on the deed. Therefore, if you sold the property, future owners would be bound to use the land in a manner consistent with the terms of the easement. Similarly, if you gave your land to your children, they would also be bound by the easement. When drafting a conservation easement, LBCT will work with you to design terms that accommodate your long-term plan for your land.
Does a conservation easement require me to give public access to my property?
No. While many landowners chose to share their commitment to stewardship, they are not required by the conservation easement to provide public access.
Is a conservation easement a good estate planning tool?
Yes. A voluntary conservation agreement can help a landowner pass land intact to the next generation. By limiting the land’s development potential, an easement often reduces its appraised value, which in turn can lower estate taxes. Your family may also be eligible for additional estate tax exclusions (see http://www.landtrustalliance.org/topics/taxes/estate-tax-incentives-land-conservation). Our staff is available to help landowners navigate the process and answer further questions
What are the federal income tax benefits?
A conservation easement can qualify as a tax-deductible charitable contribution. The amount of the donation equals the difference between the land’s appraised value before the easement and its value after the easement is placed on it. Enhanced landowner incentives were made permanent in the Tax Act of 2015, which includes:
- Raising the deduction a donor can take for donating a conservation easement from 30% to 50% of his or her annual income;
- Extending the carry-forward period for a donor to take a tax deduction for a conservation agreement from 5 years to 15 years;
- Allowing qualifying farmers and ranchers to deduct up to 100% of their income.
For example, if Mr. Smith’s 240-acre property, unencumbered, was originally appraised for $1 Million, but $600,000 after the conservation easement is placed, the value of his charitable donation would be $400,000. If Mr. Smith has an annual income of $100,000, he will be able to deduct 50%, or $50,000 per year, from his federal income taxes over 8 years, at which point in time he will have exhausted his $400,000 charitable easement donation. If Mr. Smith were a qualified farmer, he would be able to deduct 100%, or $100,000, of his annual income over 4 years, until he had exhausted his charitable easement donation.
What are the state income tax benefits?
Like most charitable contributions, the donation of a conservation easement may reduce your state income taxes as well. In addition, South Carolina offers a state tax credit (note the distinction from a deduction) equal to the lesser of 25% of the conservation easement value or $250 / acre. Importantly, the SC tax credit does not expire and is both transferable and saleable, though it is subject to a yearly limit of $52,500. Building on the example of Mr. Smith, accordingly, Mr. Smith could sell or gift the credit if he couldn’t use it.
How long will the easement design process take?
The time it takes to design and execute a conservation easement depends upon many factors but usually will fall into the 3-4 month range. If public funding is needed for a bargain sale, securing the necessary grants typically requires 1-2 years. A landowner also needs time to consider both the easement terms and a partnership with LBCT; he will need to consult qualified appraisers, attorneys, and other advisors to ensure the easement reflects his long-term interests. Generally, conversations should begin in the spring to ensure completion of a donated easement that calendar year. It is very difficult to close a donated conservation easement transaction in the same calendar year if the process begins after September 1.
What costs are associated with preparing a conservation easement?
LBCT recommends that the landowner review a draft of the conservation easement with appropriate professional advisors. In addition, other 3rd party specialists may be required during the transaction, including:
- An appraiser to determine the market value of the conservation easement if the landowner intends to claim income tax benefits;
- A tax or real estate attorney to review the draft conservation easement, conduct a title search, prepare deeds and provide general legal advice;
- An accountant to determine the income tax implications of the donation;
- An estate planner to review the implications of the easement for the landowner’s estate;
- A surveyor to clearly delineate the property to be protected;
- An environmental consultant to verify the absence of any hazardous materials; and
- A forester and biologist to prepare land and forest management plans.
- What costs do LBCT absorb during a conservation easement transaction?
LBCT’s staff of professionals will work with landowners at no cost to guide them through the process of designing and executing a conservation easement on their property. In addition, after consultation with the landowner, LBCT staff will prepare the initial legal conservation easement document for the landowner to review with his or her tax advisors. LBCT will also prepare certain supporting documents, such as the baseline documentation report, which is used to document the conditions of the property at the closing of the easement. Lastly, LBCT staff will inspect the conservation easement property once a year, after consultation with the landowner, which is required by tax regulations.
Are any grants available to help purchase a portion of a conservation easement?
Yes. LBCT can help landowners work with agencies like the SC Conservation Bank to generate grants to fund a bargain sale of the conservation easement. These partial purchases will still qualify for tax deductions on the donated value of the balance of the easement.
Does Lord Berkeley Conservation Trust charge a fee?
LBCT funds its operations through contributions of its loyal membership and through the support of private foundations. While we do not charge a fee for the time and effort required to design and execute a conservation easement on family lands, we do request that all easement donors make a meaningful contribution to LBCT to support our long-term stewardship obligations. A stewardship contribution may be made in either a single lump sum or spread over a period of several years. Our easement donors are also encouraged to contribute annually to our operations, thus helping offset the cost of providing easement design services to prospective easement donors.
Can you give me an example of how all this works?
Let’s say Mr. Smith owns a 240-acre working farm called “Greenacre” along a scenic river. It contains important wildlife habitat, scenic viewsheds, productive agricultural fields, and a stand of mature longleaf pine. Greenacre would likely qualify as having important conservation values that are worthy of protection. Mr. Smith cherishes Greenacre, having inherited it from his grandfather and wants it to continue to be used for traditional purposes, forever. He decides to consult LBCT about putting it under conservation easement. After consulting with our staff and his professional tax advisors about the benefits of a conservation easement, he decides to protect his family farm.
After working with LBCT staff, Mr. Smith decides on a conservation easement that permanently limits extensive subdivision as well as commercial or industrial development of the property. However, he reserves the right to continue farming, hunting and harvesting timber off Greenacre. Furthermore, he reserves the right to subdivide the tract into two parcels, allowing each of his children to inherit and live on a piece of the farm.
As described above, the conservation easement has a value of $400,000. Mr. Smith then works with LBCT to develop a $100,000 grant through the SC Conservation Bank to help facilitate a bargain sale. He would be entitled to income tax deductions associated with the balance of the donated easement value, as well as a transferable SC state tax credit. In addition, Mr. Smith has ensured that Greenacre will be assigned a non-development valuation, which will likely reduce potential estate taxes. And most importantly, he has protected his property for future generations to enjoy.
To whom can I speak about all this as it might relate to my property?
The LBCT staff is happy to speak with you about various conservation strategies for your property. Please feel free to call us at (843) 899-5228, or email our Executive Director Raleigh West at email@example.com.
What is a bargain sale of the conservation easement?
A bargain sale occurs when Lord Berkeley Conservation Trust offers a payment for a conservation easement interest in a property that is substantially below its appraised fair market value. Typically, a landowner can deduct the difference between the appraised value of the conservation easement and the amount paid as a charitable contribution. Often, Lord Berkeley Conservation Trust partners with federal and state funding agencies to secure grants for bargain sale transactions.