One of the primary concerns of people interested in donating a conservation easement to preserve land or historic buildings is the reduction in the value of their property which translates into less of an estate for their children. The simplest way to approach the problem is to purchase a second to die life insurance policy equivalent to the loss in market value of the estate at the time of the donation of the easement. In order to keep the life insurance proceeds out of the estate, an Irrevocable Life Insurance Trust is used. In the right type of situation, the income tax savings generated by the conservation easement could be used to fund the trust which would pay for the life insurance policy.

If you would like to leave a bequest to the conservancy who will accept the easement donation on your land, you can establish a Charitable Remainder Trust. This trust works best when you have a low income producing asset that has appreciated greatly since your purchase (for example a stock with a low yield). This asset could be contributed to the Charitable Remainder Trust. The trust can pay you an income each year until your death. At the time of the death of the second spouse, the remainder of the trust’s assets would go to the conservancy. Again, your heirs are faced with a situation where the estate has reduced in value. You can again use the Irrevocable Life Insurance Trust to make up any losses to heirs by having the trust purchase a second to die life insurance policy.

Overall, there are a variety of advantages to using life insurance in your planning:

1. Death benefits escape probate and are paid promptly.

2. Estate liquidity needs are reduced or eliminated.

3. It’s a guaranteed benefit paid with discounted dollars.

You should consult with your tax advisor to see if any of these ideas fit your situation.