One of the easiest ways to make a gift to Placer Land Trust is through planned giving methods such as a bequest.
Bequest provisions in a will and/or a revocable living trust allow the donor to control the distribution of his or her estate and to preserve as much of the estate as possible through judicious use of tax-saving opportunities.
Bequests can be used to ensure that the donor’s annual charitable contributions to Placer Land Trust programs continue; to place conservation easements on land; or to make a special gift that will enhance the Trust’s ability to achieve its mission in the future. Bequests come in several types (detailed below): Specific Bequests, Specific Bequests of a Conservation or Agricultural Easement, Residuary Bequests, Contingent Bequests, and Revocable Living Trusts.
Anyone considering his or her estate plan must seek the advice of a competent attorney and/or estate tax expert before executing a will or living trust. Placer Land Trust can provide sample language for specific, residuary and remainder bequests, but we cannot advise you professionally.
If you own real estate or other assets of uncertain value, that property should be appraised in order to assess the potential tax liability the estate will face. Many heirs have experienced unnecessary litigation expenses or unnecessarily high taxes because a donor failed to do adequate estate planning. Estate plans should be reviewed regularly so that changes in estate and tax laws or changes in a family’s circumstances can be adequately taken into account.
If your bequest to Placer Land Trust involves real estate, it is very important to meet with our staff while the will is still in preparation. If you intend to bequeath a conservation easement, we need to determine whether the easement bequest conforms to board policy, and discuss what restrictions will apply to your property. Placer Land Trust will then draft the easement for you and your attorney to review. If your intention is to leave land to the Trust outright, we also need to understand your desires for the future conservation and use of the property. With this information about the land and your goals we have a better chance of fulfilling your expectations.
A specific bequest is an outright gift of money, stocks or bonds, land, tangible personal property or other assets. Suggested bequest wording is:
I give, devise, and bequeath to Placer Land Trust, a California nonprofit public benefit corporation with offices in Auburn, California (Tax ID: 68-0223143), the sum of $____________ (or describe any real or personal property), to be used for its general purposes.
In the case of a bequest of land that has conservation value, the owner is urged to talk with Placer Land Trust before the will is signed. This will ensure that the owner’s wishes will guide the Trust’s discussions about the future conservation and disposition of the property.
Specific Bequests Of A Conservation Or Agricultural Easement
Some donors have used specific bequests to place conservation easements on land at their death. However, it is important that a donor consult with Placer Land Trust, prior to signing the will, to assure that it is possible to meet the donor’s conservation goals. Important technical details must be included when drafting conservation restrictions in order to fulfill IRS deductibility requirements; and donors should be aware of the Trust’s stewardship endowment policy for the management and enforcement of the easement. The suggested wording for bequests of conservation or agricultural easements is:
In the event I do not make such a conveyance [describe the intended conservation or agricultural easement here] during my lifetime, I hereby bequeath unto Placer Land Trust, a California nonprofit public benefit corporation with offices in Auburn, California, the development rights and conservation easements in certain real property described as follows: [the Legal Description of Protected Property should be attached]. The development rights and conservation easements to be conveyed shall be substantially in the form set forth in the Grant of Development Rights and Conservation Easements attached to this will as Exhibit [number exhibit here], and incorporated herein by reference as if fully set forth.
I further bequeath to Placer Land Trust (Tax ID: 68-0223143), the sum of $(________) as a stewardship endowment for the purpose of monitoring and enforcing the conservation easement on the property conveyed pursuant to the preceding paragraph.
In a residuary bequest, the donor leaves all or part of the balance of his or her estate to a beneficiary after all of the specific bequests have been satisfied. The suggested wording for a residuary bequest is:
I give, devise, and bequeath to Placer Land Trust (Tax ID: 68-0223143), a California nonprofit public benefit corporation with offices in Auburn, California, all [or ____%] of the rest, residue and remainder of my estate, to be used for its general purposes.
A contingent bequest provides for the disposition of the estate if one or more of the named beneficiaries fails to survive the donor. It can be used in conjunction with a specific bequest or a residuary bequest.
If any of the above-named beneficiaries should predecease me, I hereby bequeath his or her share to Placer Land Trust (Tax ID: 68-0223143), a California nonprofit public benefit corporation with offices in Auburn, California, to be used for its general purposes.
Revocable Living Bequests
Some donors prefer to plan the distribution of their estates through revocable living trusts. Like wills, donors can change living trusts while he/she is still alive, allowing him/her to retain complete control over his/her assets during his/her lifetime. However, living trusts have several advantages over wills. If the Living Trust is properly funded, the trustee can distribute much or all of the donor’s estate without the expense or delay of probate. If the donor owns real estate that requires management, such as a farm, the trustee can make management decisions should the donor become incapacitated, thereby avoiding the complexities of a guardianship. Although living trusts are simple to establish, they may in some cases be more time-consuming to set up than a will, but the beneficiaries of the estate will realize significant cost savings in the end. Because the donor usually reserves the right to revoke or modify a living trust, the donor may not realize any immediate income tax benefits. However, if properly drafted a living trust, like a will, can save estate taxes at one’s death.
Retained Life Estates
Landowners may donate land to Placer Land Trust, but reserve for themselves, and sometimes others, the right to use and enjoy the property during their lifetimes.
This is known as a gift of a remainder interest. Gifts of remainder interests are usually made by landowners in their mid-70s or older, who have decided irrevocably that they want to leave the property to Placer Land Trust. In this way, donors can take advantage of certain tax benefits and support Placer Land Trust in the long run. Landowners continue to enjoy their property knowing that we will protect the land’s conservation values after they are gone.
How does a gift of a remainder interest work?
The donor executes a standard deed conveying the property to Placer Land Trust, but reserving a “life estate” for themselves or others. The deed requires that during the period of the life interests, the holders must pay the property taxes, keep the premises insured, and generally maintain the land and buildings in good condition. If the property has conservation values, the deed may also prohibit any uses that would diminish or damage those values. Except for ensuring that its remainder interest is protected, Placer Land Trust has no right to use the property while any of the life tenants are alive.
Life interests can run simultaneously or consecutively. A husband and wife may share a life interest, so long as either is alive. A child may have a life interest after their parents are deceased. Life interests can apply to only part of the property.
At the conclusion of the life interests, the property passes automatically to Placer Land Trust. Unlike a donation by bequest, Placer Land Trust is spared the delay of the probate process. The property is also exempt from the claims of the estate’s creditors.
Is the Gift of a Remainder Interest Tax-Deductible?
The donor can claim an income tax deduction for a gift of remainder interest when the property is:
- a personal residence, including a second home;
- a farm; or a property that meets the IRS test for deductibility as having significant conservation, public recreation or historic value.
Placer Land Trust can make a preliminary assessment of deductibility, but donors should always seek the advice of competent legal counsel before making the gift.
If the Gift is Tax-Deductible, how is the Deduction Calculated?
Since the donor keeps certain life interests in the property, the charitable deduction is limited to the present value of the remainder interest. That value is determined from actuarial tables published by the IRS. It depends primarily upon the number of people who hold life interests and their ages.
For example, if the life tenant is age 90, the remainder interest is 72% of the value of the property. The figure drops to 48% if the life tenant is age 75, 26% at age 60 and just 7% at age 35. Obviously, the IRS regulations favor older donors. If there are two or more life tenants, the percentages are even lower.
One way to increase the deduction is to have the donor first convey a conservation easement on the land to Placer Land Trust (assuming donated property has conservation value), and then gift the remainder interest.
Suppose, for example, a husband and wife, ages 75 and 70, own a house and 100 acres of land with a fair market value of $200,000. If they donated just a remainder interest, their total deduction would be 31% of the property value, or $62,000. On the other hand, if they first placed a conservation easement on the property which lowered its fair market value to $125,000, and then donated the remainder interest, their total deduction would be $113,750:
$75,000 — Value of the Conservation Easement
$38,750 — 31% of $125,000 restricted value.
Like all charitable contributions, the tax deduction for gifts involving appreciated property is limited to 30% of the donor’s adjusted gross income. However, any unused portion can be carried over for up to five additional years.
What are the Estate Tax Implications of a Remainder Interest Gift?
Where the donor is the only life tenant or the donors/life tenants are husband and wife, a gift of a remainder interest completely removes the property from their taxable estate. On the other hand, if the donor names a child or some other person as a life tenant, that may create a taxable gift and a portion of the property’s value may be included in the donor’s taxable estate. Placer Land Trust can often make a preliminary evaluation of the estate tax consequences of such a gift, but in the final analysis donors should rely upon their own legal and financial advisers.
What will Placer Land Trust do with the Property after it has full title?
In most cases, the donor and Placer Land Trust have discussed and agreed upon what the ultimate disposition of the property will be before the donor makes a gift of a remainder interest. Where the land has conservation values, Placer Land Trust retains a permanent conservation easement to protect those values. In cases where the land does not have conservation value, under the conditions agreed upon with the donor, we will sell the property and the proceeds will be used to build Placer Land Trust’s financial reserves or to protect other land. If public ownership of the property is appropriate, Placer Land Trust may convey the property to a public entity with appropriate restrictions on its future use.
Occasionally, a donor will not indicate what uses should be allowed. In those cases, Placer Land Trust would analyze the property to determine what natural resource values should be protected and then restrict the land before the property is reconveyed.