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Tax Implications | Donating a Remainder Interest | Donating Land by Will | Donating a Property to Generate Conservation Funds | Donating Undivided Interests | Donations that Establish a Life Income

Donating a Remainder Interest

Donations of farms, residences or conserved lands can be structured so as to allow you and other named persons (called life tenants) to continue enjoying the land during your and their lifetimes. Under such an arrangement (called a gift of a remainder interest subject to a reserved life estate), you assume full responsibility for taxes and maintenance during your life. Then when the life tenants die or release their life interests, the land trust assumes full title to the property. This technique is appropriate both for land that you want to see protected and for farms and residences without conservation value (that could be sold to fund land protection work).

A gift of a remainder interest in a farm, residence or conservation-restricted property generally is eligible for the charitable gift income tax deduction. This deduction is determined by subtracting the value of the landowner’s reserved life interest from the fair market value of the donated property, based on Internal Revenue Service (IRS) actuarial tables. The more life tenants there are, and the younger they are, the lower the value of the remainder interest donated (and, hence, the smaller the deduction).

If you plan to donate a remainder interest for conservation purposes, you can assure the land’s protection by donating a conservation easement on the land to one organization before donating the remainder interest to a second. An alternative would be to make the gift subject to conservation restrictions that require the remainder donee to transfer or impose a conservation easement when they take title (called a conservation remainder). Either way, the income tax deduction will be roughly equivalent, depending on the restrictions.

Joy MacDonald and Bob Strain

Through the gift of a remainder interest, landowners can enjoy their property while knowing that their land will go to a land conservation organization and support its work. Photo: Ciona Ulbrich

Donating a Remainder Interest

Joy MacDonald and Bob Strain wanted to protect the wild character of their 16-acre seasonal residence on Swans Island. Joy purchased the property more than 50 years ago from a man who made it clear that he was selling it only because he trusted her to take care of it. “I’ve always felt very lucky to be here,” she reflects, “and wanted to ensure that it wasn’t destroyed and that people could walk across the land year-round to enjoy sunset views by the water.”

MacDonald and Strain decided to combine two conservation techniques, giving Maine Coast Heritage Trust both a conservation easement and a gift of a remainder interest in their personal residence. The easement precludes further development (beyond the small existing cottage) and guarantees continued traditional use of the beach and shorefront. The reserved life estate enables MacDonald and Strain to enjoy the property throughout their lives while providing for MCHT to assume fee title thereafter. The easement will be transferred to Acadia National Park before MCHT takes fee title, and the Trust can decide then whether to convert the property into a preserve or sell it to fund other conservation work. Either way, the land will remain protected.

Combining techniques enabled MacDonald and Strain to qualify for two charitable gift deductions (one for the easement gift and one based on the present value of full but deferred ownership under the restricted remainder interest) in two separate tax years. More valuable still is the assurance that their cherished property will be well cared for through the ages: “this will be our legacy,” Bob Strain observes. “People will come by and it will be unchanged.”