A red-flag alert recently went out over the Internet warning that a new tactic is being used surreptitiously to deprive landowners of their property rights. The alert was raised by a woman who actually read the fine print after she and her husband had their wills and trusts updated. She was shocked to find a clause had been inserted that would allow the "trustee" to create a conservation easement on their property "without the consent of any beneficiary." When she asked her attorney about this she was told the clause had been "standard language," part of the boilerplate since it was recommended by a lecturer at a national conference in 1998.
The lecturer was Elizabeth Crewson Paris, a nationally recognized attorney in the fields of agriculture estate and tax planning. But Paris, who gave up her practice in June 1999 to become a tax counsel for the staff of the Senate Judiciary Committee, claims her advice was misinterpreted. Paris acknowledges having taught attorneys to create trusts and advising that the clause be included. But she says she always stressed that attorneys must explain its purpose to clients.
"I was trying to make attorneys think outside the box, to suggest options that will give a trustee the ability to deal with all of a person's assets," says Paris. She insists the clause granting a trustee authority to put the land under a conservation easement "without the consent of any beneficiary" is necessary because the trustee, who usually is the family lawyer or an heir of the property owner, often doesn't have much time to execute a trust and having to contact all the other beneficiaries could be time-consuming.
Misinterpretation or not, the incident illustrates the subterfuge, real and imagined, that critics say has become common in the burgeoning multibillion-dollar conservation-easement movement.
A conservation easement is a legal agreement in which a private landowner (the grantor) donates or sells the development rights on his or her property to the government or a tax-exempt nonprofit charity (the grantee). The grantor agrees that he and all future owners of the property will use it only for specific purposes. The landowner also gives up some privacy because the grantee is given the authority to monitor and enforce the terms of the easement -- at the expense of the landowner. The easement usually is perpetual -- that is, for eternity.
The ostensible intent of such a legal maneuver is to save the environment and ensure that the land is maintained forever as open space or as, say, a family farm or ranch. But during the last decade it has been fueled by infusions of taxpayer money to huge land-trust charitable foundations, and new IRS laws baiting the hook with potentially huge tax breaks. The greatest tax break for farmers and ranchers in these schemes comes from their effect on the estate or "death" tax that heirs must pay. Literature from the American Farmland Trust puts it this way: "Removing the development potential from farmland generally reduces its future market value. This may help facilitate farm transfer to the children of farmers and make the land more affordable to beginning farmers and others who want to buy it for agricultural purposes. The reduction in market value may also reduce property taxes and help prevent them from rising."
But Carol W. LaGrasse, president of the Property Rights Foundation of America, notes that tax breaks are not automatic and can vary widely from state to state. Moreover, unless the easement is granted "in perpetuity" (that is, forever) the tax breaks don't apply. Some states, including North Dakota, Nevada and North Carolina, do not allow perpetual easements unless they are sold to the federal government -- which is not bound by state law.
LaGrasse believes that, rather than encouraging people to give up property rights to avoid taxes, it would be better to change the tax laws. …