With the holiday season in full swing, many are trying to find that "perfect gift" for a loved one. If you are lucky enough to own a piece of land in this beautiful Commonwealth, let me offer a suggestion. This gift cannot be wrapped in a bow or placed under the tree, but it will provide perpetual enjoyment while also providing unique benefits to you, the grantor. This gift is a conservation easement.

A conservation easement is a legal agreement between a landowner and a qualified organization such as a non-profit land trust or a government agency that permanently limits uses of the land in order to protect its conservation values. Chances are, if you have driven by the local lush rolling hills and picturesque farms, you have seen such an easement. In Kentucky, a conservation easement is defined by statute as:

[A] nonpossessory interest of a holder in real property imposing limitations or affirmative obligations, the purposes of which include retaining or protecting natural, scenic, or open-space values of real property, assuring its availability for agricultural, forest, recreational, or open-space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archaeological, or cultural aspects of real property.^[1]

An agreement between the landowner and a qualified organization can be flexible so that the landowner's specific objectives are achieved. With any grant of a conservation easement, the landowner will lose some traditional property rights. For instance, he or she may lose the right to erect future structures on the land; but again, every agreement can be tailored so that the land is preserved while also still beneficial to the landowner. In order to qualify for a substantial tax deduction, a conservation easement must be unlimited in duration - meaning that future owners of the land will also have to honor the easement terms.

When you grant a conservation easement to a qualified organization, you are ensuring the preservation of land and its various benefits for future generations. You are gifting the rare and precious commodity of unspoiled space. Yet, grantors may benefit from their own generosity. By making an easement donation, the grantor may be entitled to receive a tax deduction. If the donation meets certain federal tax code requirements, it can qualify as a substantial tax-deductible charitable donation. The value of conservation easements greatly varies, as does the value of any land parcel, and an appraisal will be necessary before taking a potential tax deduction.

Perhaps the most important advantage of gifting a conservation easement is that doing so can reduce the amount of the grantor's estate tax. Because a conservation easement removes the potential for the land to be developed, the land's property market value is typically lowered, which in turn lowers the potential estate tax. There is an additional estate tax reduction only available to conservation easement donors which reduces the value of the property with a conservation easement by an additional 40%. It is often a grantor's intent that heirs receiving real property will be able to keep it intact. Unfortunately, sometimes a deceased's estate tax is so high that the heirs are left with no choice but to sell the real property in order to pay the outstanding debt. By granting a conservation easement, a grantor is taking a wise step in ensuring that his or her heirs are not saddled with an unsurmountable tax and may be able to continue to own and farm the land for future generations.

_{[1] KRS §382.800.}