Thoughts on Conservation Easement?

[riptides]

When we moved to our farm some years back we approached the various CE programs offered in our State to see what the deal was.

We were interested in preserving portions of our land for what ever the future might bring.

The deals the CE people brought to our table were very professional and at that time, served both parties well. They would have provided fencing, including removal of old fencing, replanting of native trees, watering access and of course less taxation, with the added benefit to us of money in our pocket.

We opted not to do it, we figured since funds were limited, perhaps someone else could benefit. Over the last few years more of our area has turned to the CE programs. I think about the dollars and the work and benefits that could have been provided, but we have clear titles, and I think the next generation can make some thoughts on their own.

In the meantime, we perform cleanup and work to get the properties back to their "golden era" status. Like I said, someone else can make the hard choice in the future.....

 

[Furu]

Land is in WA State... I did look into it a few years ago... the next step in the process as I understood was to prepare a formal management plan with the help of a forester... I was also told that the lines may have to be redrawn since part of my home shop is on the 10 acre parcel.

Property Taxes, home and land/acreage, are a real concern... went from around $7000 (Based on my Purchased Price in 2005 to $12,000 the last 3 years.

I did my research prior to purchase and decided to buy because WA had I-747 property tax limits in force... it was later overturned in the courts and taxes went up overnight.

Assessor office has been friendly but will not budge... they say land with water resources... streams, creeks, etc... is the only segment increasing in value each year.

High Taxes based on buildable land have forced several in the area to sell for development... Neighbors that built in the 1950's have also seen taxes spike on their 3 acres and home... it is a real concern for them...

Now, if I only had a crystal ball...

I would encourage you to look at putting it into timber or forestry taxation. Yes a FMP (Forestry Management Plan) is required. Washington State Extension has courses that will help you write them but they can be done with a good example and some work on sample plots, soil types, stand maps and the like. My county has a forester that will work with you to approve the plan and then to get the assessor to change the status but I don't know about Thurston County. I can ask my forester if Thurston has someone like her on staff if you want. I assume your property is in Thurston from your tag.

 

[dmccarty]

Our land is under a forestry valuation program.

We had to do it because a few years after we bought the place the property value went up by at least 10 times what we paid and the property tax followed. We would have had to sell the land if we had not been able to quality for the forestry valuation.

Last night the county had a meeting for land owners who are in the forestry valuation program. The notice I got scared the heck out of me but after going to the meeting we are ok. Our land was put into the program in 2005 or 2006. In 2004 land put into the forest valuation program had to have a management plan. The state is requiring a review of properties in the program and it looks like they are going to require that properties without a plan get a plan.

In NC the Forestry department will create a plan if you can get wait for them to get to you. The land owner can pay a private forester. Or you can do it yourself. I did my own. It sure was not hard. At the time I could not get the state to do the plan in the time frame I needed. Last night the state foresters at the meeting said it takes them about six weeks to do a plan. They were good guys but six weeks?

In NC one of the requirements for the forestry plan is that the land comprise of 20 acres or more. If there is a house on the land then one acre is taken out for the house. So you really need 21 acres if you have a house on the land. There was a back and forth conversation between the tax people and the foresters on rounding up. For instance if there is a power line running through the property that land will be excluded since it cannot have trees. But access roads and fire breaks will count. The forester said he rounds up. The tax people did not like his rounding up. They had a good back and forth conversation. I felt like buying the forester a beer. :thumbsup: The crowd like the forester as well. :laughing:

The tax people were good and they were mostly correct in what they were saying about rounding up but of course that is not what people want to hear. :laughing: But to be honest they were not out to shaft people and were trying to be as helpful to the landowner as possible.

The meeting had county tax people, a tax guy from the state, the foresters and a couple of guys from the extension office. Good meeting. Norman Rockwell could have used the meeting for a painting.

One old farmer said his farm had been in existence for 89 years and was 700 acres. 700 acres is big land around here. Wish I could have talked to him. There was another older couple sitting up front that was a hoot to listen too. They had been married a LONG time.

I have only had one bad interaction with a county employee in 11 years and the one bad apple is gone. The employees in multiple departments have been very helpful. Even the tax people.

Talking to your county extension office would be a good start about the CE. NC has a new wildlife land valuation program. I looked into it when it came out but the forestry valuation is better. Last night the wildlife valuation program came up and the local extension people and the state tax man knew quite a bit about the program and who to talk to in another agency to get to the guy who runs the program.

The extension guys were very knowledgeable and were pointing out how certain things could be good or bad for the land owner.

I most certainly would not be pressed into making a decision in a short time frame that they seem to pressing you to do. That sounds like a used car sales tactic.

Not only do you have to think about the property tax issues but also the short and long term use YOU want out of the property. AND what you will do if you pass the land to your family in your estate. Do you want to limit what they can do with the land? Or do you really want to protect it from development? Or do you want to allow some development?

The estate issues popped up last night the the guy with 700 acres. It was very apparent that one has lots of issues to deal with in land ownership. Not only CE and property tax issues but estate planning. The wrong decision can be expensive.

Start with the county and the state. And you really might need a good lawyer who is up to speed on these issue.

Later,
Dan

 

[beppington]

Dan, things seem to be out of whack when taxes are so high private land owners have to consider turning over some of their land ... some rights to it that is ... to the govt just to be able to afford to keep it. Especially when someone's owned the land for a long time.

Like being forced from a sole ownership into a time-share.

I guess the alternative is to sell it out-right to another individual, obviously not something any of us want to have to do just because of a high tax bill.

Here we have a "Save Our Homes" tax increase cap of 3% per year for your homestead, which certainly helps ... but there's also a cap for non-homestead property: 10% per year which in a worst-case scenario would cause your property tax bill to double in only about 7 years.

Do I think my income will be double in 7 years? No I do not. In fact, in today's economy my income might be less in 7 years

I've heard it argued that there are times when it's better to rent than own. I certainly don't want to do that, but maybe this is one of those era's.

 

[dmccarty]

Dan, things seem to be out of whack when taxes are so high private land owners have to consider turning over some of their land ... some rights to it that is ... to the govt just to be able to afford to keep it. Especially when someone's owned the land for a long time.

Like being forced from a sole ownership into a time-share.

I guess the alternative is to sell it out-right to another individual, obviously not something any of us want to have to do just because of a high tax bill.

Here we have a "Save Our Homes" tax increase cap of 3% per year for your homestead, which certainly helps ... but there's also a cap for non-homestead property: 10% per year which in a worst-case scenario would cause your property tax bill to double in only about 7 years.

Do I think my income will be double in 7 years? No I do not. In fact, in today's economy my income might be less in 7 years

I've heard it argued that there are times when it's better to rent than own. I certainly don't want to do that, but maybe this is one of those era's.

The farmer with 700 acres was bringing up estate issues which was not the subject of the meeting. But it was danged interesting. His problem is leaving the farm to his kids at least one of whom wants to farm. I do not know where his land is in the county but I would guess it might be worth $5,000 an acre. If he left that to his son and Congress lets the tax increases go through on 1/1/2011 his son will have to come up with over 1.75 million dollars to pay the Federal taxes.

From a money point of view it would be better for for the old man to die before 1/1/2011....

He brought up one I think I said earlier. That the county and the state are trying to save the family farm AND stop development but taxes are driving land holders to sell.

This was the problem we had as well because of property tax. Without the forest valuation we would not have been able to afford the property tax and we would have had to sell. Which is so ironic because the $%^&* who used to be our county BOC and the twits who elected them do not want housing development. Yet both the voters the the BOC live in housing developments.... :confused2: Our land is subdivided and ready to sell. We do not want to sell but if we lost the valuation we would have too.

The county does not want more houses since from a tax perspective it costs more for services for houses than a business. But the anti development voters and their ex BOC hate business more than housing development so we have a very ugly tax base situation. The same crowd also wants more spending on things like a bus that nobody rides. A full size bus that I have never seen more than three people riding. I did the math and best case with their numbers which are lies it cost around $250 a month per rider. The more accurate number is $666 per rider month.

There are plenty more spending idiocy these people have come up with over the last few years. They have killed tax revenue growth with their anti business stances, have increase county spending which is going increase property taxes over the next few years. They got voted out of office but just barely and I am afraid it might be too late.

Later,
Dan

 

[IslandTractor]

Dan, things seem to be out of whack when taxes are so high private land owners have to consider turning over some of their land ... some rights to it that is ... to the govt just to be able to afford to keep it. Especially when someone's owned the land for a long time..

It is the tax bill that is high typically not the tax rates. The problem is that development and inflation eventually make land more valuable so the same tax rate will result in a much larger tax bill. Of course rates do also go up from time to time but I think the biggest problem for large (more than a single home lot) land owners is suburban sprawl which drives up land value.

 

[smstonypoint]

The farmer with 700 acres was bringing up estate issues which was not the subject of the meeting. But it was danged interesting. His problem is leaving the farm to his kids at least one of whom wants to farm. I do not know where his land is in the county but I would guess it might be worth $5,000 an acre. If he left that to his son and Congress lets the tax increases go through on 1/1/2011 his son will have to come up with over 1.75 million dollars to pay the Federal taxes.

From a money point of view it would be better for for the old man to die before 1/1/2011....

Last spring, the Forestry Department at NCSU sponsored a series of state-wide workshops entitled "Conservation Easements and Working Forests." I attended the workshop in Statesville.

Some conservation easements can be a useful tool in estate planning for farming and forestry operations. Here's a recap of what I remember about how they can be used.

1. Provided that you can find a land trust willing to accept the easement, you donate a permanent easement to the trust. Because the easement removes the development potential of the farm, the property value is reduced and you receive tax deductions/credits for the donation.* Combined with allowed annual non-taxable gifting, the value of the taxable estate can be decreased considerably.

2. Depending upon the easement terms, you and your heirs can continue to use the property for farming and/or forestry. But the easement remains -- the property can't be developed.

3. You need to shell out some money in the process for attorney, accountant, and appraisal fees. The land trust may expect a "cash donation" to administer the easement.

These easements are not for everyone or even for most folks, but they could be a real boon to some.


Steve

* I am hazy on this, but I think you may be able to use income-averaging with respect to the deductions/credits.

 

[ultrarunner]

I'm 3 acres short of 20 when both plots are combined... the plot with the home and half the shop and the plot with the other half of the shop and the two steams.

I noticed the Tax Assessor Values based on highest and best use... and that almost always seems to equate to development potential.

It is exactly as mentioned above... the Assessor/Collector are actually driving development because that is how they base land value... potential development.

With the relatively new 200 feet setbacks on both sides of creeks and having two creeks... a lot of that potential would seem to be negated... not according to the county.

Assessor says I would have to be denied a building permit for them to take setbacks into consideration.

There really does seem to be a lot of hoops to go through for the average land owner wanting quiet enjoyment and affordable property tax.

CA does have Prop 13 which helps to keep taxes on the predictable side... never realized how important this can be till I became familiar with Washington State...

Don't really know where this is all headed and I'm hesitant to make a forever commitment when nothing else is forever...

My plan has always been to enjoy the property as-is... frankly, just don't have the kind of money to through around only to be penalized through taxes for improving my land.

Farming doesn't appear to be a viable option... unless I can fish farm the salmon swimming up stream...

Learned a lot just reading through the posts and have a new understanding of what's involved.

Don't really know what would happen to the property after my demise... don't have kids and the nephew and nieces have never visited... their parents say it is just too far away and you know it rains all the time in WA...

Can't help but think what a great place for a kid to be a kid... forests, streams, rocks to climb on and no poison oak to worry about!

I didn't realize that almost all my neighbors have their land in some sort of program and they almost all have much larger parcels. Kind of makes me wonder if the value of my parcel is being driven by the fact all of my neighbors seem to be built out and I do have at least one remaining open buildable parcel.

 

[BethesdaEC]

Here in Howard County, Maryland we have a preservation program that I am interested in get more information on. I talked with my lawyer briefly about it, basically I get a discounted tax rate and commit the land to the preservation for 50 to 100 years. The original 700 acre land grant for my property was given in 1685. The house was built sometime between 1682 and 1770 and currently sits on 8 acres which in this suburban city is remarkable.

The previous owners had the property subdivided and were trying to build an 11 home subdivision wrapping around this historical property. Fortunately the housing downturn prevented this from happening. The legacy I would like to leave on this world is the preservation of this little piece of history. So many of the historic homes in Howard County have been all but destroyed by selling everything but the smallest lot size and surround these houses with a sea of McMansions.

I know that I am reducing the value of my property, but honestly I have no intention of ever moving again, so that is a moot point.

 

[ultrarunner]

Here in Howard County, Maryland we have a preservation program that I am interested in get more information on. I talked with my lawyer briefly about it, basically I get a discounted tax rate and commit the land to the preservation for 50 to 100 years. The original 700 acre land grant for my property was given in 1685. The house was built sometime between 1682 and 1770 and currently sits on 8 acres which in this suburban city is remarkable.

The previous owners had the property subdivided and were trying to build an 11 home subdivision wrapping around this historical property. Fortunately the housing downturn prevented this from happening. The legacy I would like to leave on this world is the preservation of this little piece of history. So many of the historic homes in Howard County have been all but destroyed by selling everything but the smallest lot size and surround these houses with a sea of McMansions.

I know that I am reducing the value of my property, but honestly I have no intention of ever moving again, so that is a moot point.

Sounds like a keeper... got any pictures?

 

[BethesdaEC]

Sounds like a keeper... got any pictures?

I have about 2 1/2 acres of cleared land and 5 1/2 of woods.

 

[MarkV]

Here in Howard County, Maryland we have a preservation program that I am interested in get more information on. I talked with my lawyer briefly about it, basically I get a discounted tax rate and commit the land to the preservation for 50 to 100 years. The original 700 acre land grant for my property was given in 1685. The house was built sometime between 1682 and 1770 and currently sits on 8 acres which in this suburban city is remarkable.

The previous owners had the property subdivided and were trying to build an 11 home subdivision wrapping around this historical property. Fortunately the housing downturn prevented this from happening. The legacy I would like to leave on this world is the preservation of this little piece of history. So many of the historic homes in Howard County have been all but destroyed by selling everything but the smallest lot size and surround these houses with a sea of McMansions.

I know that I am reducing the value of my property, but honestly I have no intention of ever moving again, so that is a moot point.

If the house is that old have you looked into the National Historical Registry? If you are excepted you are limited as to what can be changed on the exterior of the house but get a tax break. There are not that many 1700's houses left so you may well met the qualifications.

MarkV

 

[dmccarty]

...

Because the easement removes the development potential of the farm, the property value is reduced and you receive tax deductions/credits for the donation.* Combined with allowed annual non-taxable gifting, the value of the taxable estate can be decreased considerably.

This was mentioned in the meeting I went to as well.

Yesterday I received the NC Wildlife magazine which had an article about the NC Wildlife Land valuation program. The meeting I attended covered what was in the story but what was interesting was the comment made by a landowner. If he did not get a lower valuation on his land and thus property taxes he would have to sell.

Which is the problem with revenue generated by property taxes. One can be Land Rich and Cash Poor. An being Cash Poor can cause you to loose the land.

I know a family that used to own 1,000 acres in north Raleigh. Land that is worth a medium sized fortune. Capital Blvd runs through their old land. One the east side of the road there used to be a two story farm house that was the families. North of the house is what was a small church for which the family donated the land. The church has grown and a new Mansion Church was built. East of the road and church is a small pond which is surrounded by a subdivision and commercial buildings. This was the farm pond the old farm house looked over.

The family lost the land when the great grandmother lost her husband and she had no income to pay the property tax. The land was sold out from under her.

Property tax means we rent our land from the state. Period. And we have little say on the rent we pay. But we will pay or we will loose the land one way or another.

Later,
Dan

 

[smstonypoint]

Yesterday I received the NC Wildlife magazine which had an article about the NC Wildlife Land valuation program.

Dan,

Thanks for the info. I need to follow up on this. My farm is currently under the NC forestry-use valuation program. According to my management plan, two tracts with hardwoods are supposed to be harvested within the next 5 years. I would prefer to delay that harvest, so I will check to see whether the tracts could be reclassified for wildlife use.

Steve

 

[ultrarunner]

I have about 2 1/2 acres of cleared land and 5 1/2 of woods.

Wow... great property and location... are you sure there's not a Rockefeller or DuPont in the family tree?

 

[ultrarunner]

Had a chance to find out what the agency is looking for and why the interest.

Ideally, they would like a conservation easement donation or they are willing to purchase my land for Assessed Value at no cost to me...

The Donation has tax advantage possibilities.

I thanked him for contacting me and said that I'm happy with the way things are right now.

He asked that I keep him in mind should I ever decide otherwise.

 

[BethesdaEC]

Wow... great property and location... are you sure there's not a Rockefeller or DuPont in the family tree?

I got a sweet deal, but I spent 6 months renovating before we could move in. Its got new electric, most of the plumbing has been replaced, floors have all been refinished and I have spent every free minute it seems fixing it. Had to evict three snakes including a 7 foot black snake. The kitchen is the next thing on the list.

 

[dmccarty]

Dan,

Thanks for the info. I need to follow up on this. My farm is currently under the NC forestry-use valuation program. According to my management plan, two tracts with hardwoods are supposed to be harvested within the next 5 years. I would prefer to delay that harvest, so I will check to see whether the tracts could be reclassified for wildlife use.

Steve

They said in the meeting that if you are in a Forestry valuation plan that financially it is best to stay in the plan. The Wildlife valuation plan does not get as much of a discount off of property taxes compared to Forestry.

The Wildlife Resource Commission runs the Wildlife valuation. A biologist will visit to see if the land qualifies. They will also help create the management plan AND verify the plan is being followed. They are looking to protect certain species and landscapes.

What the State Revenuer and the county Revenuer :laughing: said was that the forestry plans are not written in stone and that one does not have to do X at Y time per the plan. X just needs to get done at some point around Y time. The last time I checked the prices on timber sales the price was low, about 200 per thousand board feet. It would be hard to argue that you should sell timber until the price improves and/or reaches a peak. The major push they were doing was to get properties that had been in the Forestry valuation to get a management plan and to verify that those properties still qualified. They were not going to be sending out a Forester to verify your plan. They can check photos of course and they said they do but that was to verify land size and to make sure one had trees and not a bunch of black berry bushes.

There is a WRC biologist in charge of the Wildlife valuation. They mentioned his name in the meeting but I did not write his name down. The Wildlife valuation program is managed by the WRC and they said the program requirements were on the NCWRC Home Page website. They said it was buried on the site. It cannot be to hard to find because I know I found it earlier in the year and read about the program.

Later,
Dan

 

[smstonypoint]

There is a WRC biologist in charge of the Wildlife valuation. They mentioned his name in the meeting but I did not write his name down. The Wildlife valuation program is managed by the WRC and they said the program requirements were on the NCWRC Home Page website. They said it was buried on the site. It cannot be to hard to find because I know I found it earlier in the year and read about the program.

Later,
Dan

Dan,

I found the info on the NCWRC site, although for some reason I had to switch from Firefox to IE to read the document.

http://www.ncwildlife.org/Wildlife_Species_Con/documents/Introduction_WCLP.pdf

Based on my initial reading, it looks like I will be sticking with my forestry-use valuation. I just had my forestry management plan redone last year, so I have some time to explore my alternatives.

Thanks again for the useful info.

Steve

 

[dmccarty]

Dan,
...

Thanks again for the useful info.

Steve

Welcome.

The meeting I attended was interesting. There certainly was some tension in the air. The email that was sent out had me and I think other landowners worried. After a few minutes in the meeting the tension went out of the air.

One of the big things I took away from the meeting was that if you have a recent management plan you are good to go for a decade or two. It would be wise to update your paper work and show you are following the plan over that time but it was not likely they Revenuers were going to be a calling to ask to see your trees. They were too nicely dressed to be walking around Tick Land. :laughing:

I forgot to mention something in my last post. I brought it up in the meeting to make sure other people knew. NC used to have a phone number you could call to find out the values of timber sales in your region during the last quarter. I think they still have this number. They also have a website link that does the same thing. I think this was on the NC Forestry website. The foresters mentioned Timber Mart-South Market News Quarterly but it looks like they are selling the information. NC state had the prices for free. Maybe Timbermart gives out recent prices and not prices from last quarter.

In any case when it is time to sell contact the Forestry guys and/or the extension office for the correct links. They were also good sources of information about timber taxes.

They mentioned this site for tax information, Home — National Timber Tax. I should have posted it soon since it might help Mr. Runner. :laughing: I just noticed they have sections regarding Estate planning and other good stuff.

I *** THINK *** I used this site when I sold timber years ago. The site has changed quite a bit. If this is the same website it was created by a PHd who helped write the Timber Tax laws for the Feds many decades ago. He used to have his text book available for free download on the website.

Later,
Dan