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54 <br />Example: Farm in an <br />Urbanizing Area <br />Without Easement Donation <br />Farm Value $1,700,000 <br />Other Assets 150,000 <br />Annual Income 40,000 <br />Estate Tax Due 520,500 <br />Income Tax Due 6,246 <br />With Easement Donation, three <br />home sites reserved <br />Farm Value 1900,000 <br />Other Assets 150,000 <br />Annual Income 40,000 <br />Estate Tax Due 173,500 <br />Income Tax <br />Deduction 12,000 <br />Income Tax Due 4,006 <br />Source: Preserving Family Lands: Book <br />TT Ctar%hPn f Qmnll <br />CONSERVING YOUR FARMLAND THROUGH <br />ESTATE PLANNING <br />Your property and other assets are your estate. An <br />estate plan is like a map that guides the use and <br />appearance of your land now and in the future. Estate <br />planning can help you transfer ownership and <br />management of your farm and other assets to family <br />members; reduce income and estate taxes; ensure peace <br />of mind and enable you to protect the future of your <br />land. While there are several components that complete <br />an estate plan, below are some tools that can help. <br />Agricultural Conservation Easements <br />Conservation easements are voluntary, legal <br />agreements between the landowner and a nonprofit <br />conservation organization, such as a land trust, or a <br />government agency. Under the agreement you give up <br />certain rights to develop the land intensively, while <br />retaining ownership and agricultural use of the land. <br />Just as :all landowners and properties are different, every conservation easement is different, <br />depending on the landowners' needs and the natural resources and activities on the property. <br />Substantial tax reducing incentives encourage landowners to donate conservation easements. <br />For example, a family preserved 121 acres of their historic Orange County farm with a <br />conservation easement. The easement allows agriculture, forestry, and the construction of <br />related buildings, such as greenhouses or barns. A portion of the property is reserved for the <br />family's residential use, but the farm itself can never be developed for non - agricultural <br />purposes. Several dozen other North Carolina farm owners have granted similar <br />conservation easements to protect their family lands and reduce taxes. <br />Donating a permanent conservation easement may significantly reduce your federal and state <br />income taxes. The value of the property's development potential restricted by the permanent <br />conservation easement qualifies for a charitable federal income tax deduction and state <br />income tax credits. In many cases, estate taxes are also reduced for your heirs. Property <br />taxes may also be reduced in some cases. <br />Purchase of Development Rights (PDR) <br />You may also sell a conservation easement — the future rights to develop your property <br />intensively. This transaction is similar to a donation of a conservation easement, with the <br />landowner retaining ownership of the land while giving up certain development rights. <br />However, PDR allows you to change some of your real estate value into cash value. If the <br />conservation easement is sold for a price below the appraised fair market value, the <br />difference between the market value and the selling price may qualify for a federal and state <br />