Easement or Fee Simple Donation?

Easement:

Easements are legal documents stipulating usage restrictions, usage allowances or both. In other words they can prevent you from using your property in a certain way or can allow someone else access or use of your property. Easements usually “travel with the land” in that they stay in force even if a property is transferred to a new owner. Most of the time a copy of an easement is literally attached to the physical title in courthouses. This makes them easy to notice if someone investigates the title during a property sale, tax value consideration, or for a new building permit.

Most people think of an easement as a claim on a property or its use by someone else. For example utility companies may be granted easements to dig up your yard to run their pipes or wires. Or a landlocked landowner may be granted an easement to use another person’s property in order to access their own property. In those cases the land itself is secondary to the usage prescribed by the easement.

But a conservation easement thinks first of the land. It stipulates how the land can be used in order to meet specific conservation- related goals. It can be used to protect water quality, storm water management, plant and animal habitat, recreation, historical site, scenic views, and even agriculture. The easement allows a landowner to permanently protect for one or more of these reasons without giving up ownership of their land. So, why would a landowner need a document like an easement to do what they want with their land? The short and typical answer is money, but there are other reasons too. But starting with money: permanently giving up rights on how a property can be used by placing a restrictive easement on it devalues the land. The difference between the value of the land pre- and post- easement is considered a charitable donation and as such may provide tax benefits depending on an individual’s situation. Some States also offer enhanced tax benefits to encourage more land conservation. The other primary reason to encumber a property with an easement is out of love and respect for the land. A landowner may want to serve future generations by guaranteeing that a property will never change. They can create some certainty that their great grandchildren will play on the property just as they did as a child. Leaving a family property to be perpetually preserved is a powerful legacy. However, just putting an easement on a property is not enough so the IRS and States generally require that a neutral second party “hold” the easement. This party is responsible for making sure the easement stays in force and making sure that its provisions are not violated. The landowner still retains ownership of the land and can control usage and access to the land as long as they are in compliance with the terms of the easement. Landowners typically cover the land trust’s costs associated with accepting the property and usually make a voluntary significant donation to the land trust. These donations are important as the land trust has a perpetual duty to monitor the property, so it needs endowment funds to remain financially viable forever. A land trust also has to be prepared when a second or third generation decides that the easement is not a good idea anymore. The land trust may have to fund court cases in order to honor the commitment the land trust made to the original landowner to protect their intentions, even against their very family. That sounds strange but usually the easement is created specifically for the dual purpose of saving it both for and from future generations.

 

Fee Simple:

A fee simple transfer land ownership is the clearest and most typical form of land ownership. Most all real estate transactions involving transfer of ownership are fee simple transactions. Land is exchanged for mutually acceptable payment and all rights to the land are transferred to the new owner.

So why would someone give away the property when an easement might still satisfy their intentions. As expected, money is a consideration! With an easement the donation value for tax purposes is the difference between the value of the land pre and post easement. With a fee simple donation a typical appraisal of the land value determines the donation value. You eliminate the somewhat subjective value calculation associated with an easement donation.  The donor also has a higher level of certainty that their objectives for protecting the land are met by allowing the land trust to own the land. A land trust is not going to attempt to dissolve the easement. By donating the land you also have much greater opportunity to allow public access and benefit.

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