How to Save Your Property
First, What does an Historic Preservation Easement mean? The word “easement” is a bit of a misnomer. We tend to think of easements as land set-aside for utility companies to maintain their wires or pipes. In the Preservation sense of the word, a Preservation Easement is a contract between a property owner and a qualified non-profit 501(c) 3 organization such as the Kentucky Trust for Historic Preservation. The owner agrees not to destroy or significantly alter the property involved. The Trust agrees to monitor the property on an annual basis. The Easement is placed on the deed, and all future owners of the property must agree with the legal limitations set forth in the Easement.
The basic difference between a Conservation Easement and a Preservation easement is a small one. Conservation Easements ten to deal mostly with land, while Preservations deal more with historic buildings, their view shed (from a public road), and surrounding land. The common goal with the two is to remove property from future development. The difference in value between undeveloped land and its potential developed value is the value of the Easement, and the dollar figure you can then write off your taxes for up to five years.
The first step toward obtaining a Preservation Easement is to contact the Kentucky Trust for Historic Preservation at the address on the left, by phone (502) 320-9735, or e-mail at firstname.lastname@example.org . We will send you information and answer any questions you may have. Eligible property includes any on the National Register of Historic Places, in a Historic District, contributing property, or property eligible for placement on the National Register.
Once you understand the general process, you should arrange for a qualified real estate appraisal to be done on the property to be included in the easement. The appraiser should be familiar with current similar property values, as well as the factors involved in potential development values. The property owner is responsible for the appraisal fee. If you don’t have or know an appraiser, the Trust can recommend appraisers with whom we have worked
The donor is entitled to a charitable deduction in the amount of the fair market value of the donated interest. In other words, the difference between the highest and best use value and the value with the Preservation Easement in force.
Legal references about Easements are found in Section 6 of PL 96-541, the Tax Treatment Extension Act of 1980, codified as Internal Revenue Code Sections 170 (h), 2055 (f) and 2522 (d). Treasury Regulations sections 1.170A-14 further clarify the qualifying donation of easements. This deals with how easements must protect National Register Properties.
Generally, in the case of appreciated real property, the deduction may not exceed 35 percent of the donor’s adjusted gross income in the year of the gift. Any excess may be deducted over five additional years, or until the value of the donation is used up, whichever comes first.
Once the Appraiser furnishes the before and after figures of the easement, the next process is to negotiate the Easement Contract. The Kentucky Trust has a basic document to start with, and many terms are negotiable. Each document is tailored precisely for the property and owners involved. We suggest that owners go over the Easement document with their attorney and/or financial advisor. The Trust has the names of recognized attorneys and trust attorneys familiar in the Easement process, in case you require additional help.
When all parties have agreed on the Easement document, it should be signed and notarized. One copy, with the certified National Register documentation, a copy of the Appraisal and any pertinent photos should then be attached to the property’s deed. The Easement stays with the deed, and any future inheritors or purchasers must agree to it before the deed is signed over.
Another copy of the Appraisal and the Easement should be filed with the Property Valuation office in the County to immediately lower the base on which property tax is valued. This will also decrease future estate taxes and personal income taxes. More information on that is available by request.
The Kentucky Trust looks forward to receiving your donation of a Preservation Easement on your property, and knowing that your lovely home cannot be changed significantly in perpetuity.