Even with the changes in the estate tax laws made in 2001, estate taxes can make it difficult for landowners to pass land on to their children. Heirs may be forced to sell all or part of their land in order to meet their tax obligations. This is because estate taxes owed can represent a significant percentage of the value of the property. An easement can significantly lower estate taxes in two ways: (1) since the easement reduces the value of the property, the estate taxes will be lower; and (2) under the American Farm and Ranch Protection Act, if a landowner donates an easement, his or her heirs can exclude up to 40% of the remaining value of the land (subject to a $500,000 cap) from the estate taxes owed. Further, PEC is working to expand this provision and has been able to get legislation introduced that would raise the exclusion percentage to 50%and raise the cap on this exclusion to $5,000,000.

If the family has not done the proper estate planning in advance and needs to reduce the estate tax burden, the heirs can elect to donate an easement after the landowner's death and get the same estate tax benefits described above. This post mortem option has helped a number of families keep land in the family from one generation to the next.

Please see the attached fact sheet for more information on the American Farm and Ranch Protection Act, or contact Heather Richards, PEC's Director of Land Conservation at 540-347-2334.

PEC provided this summary of the tax benefits of conservation easements for informational purposes only. Please consult your attorney and/or accountant for professional advice on the implications of an easement donation for your own tax situation.