Texas is one of the most beautiful, varied landscapes in the U.S. From green forests and sparkling coastlines, to open desert, fertile prairie, and imposing mountains, you can find just about any landform in this state.
And if you’re a Texas landowner, setting up a land trust could be one way to help preserve some of that beauty.
If you’ve made Texas your home and are wondering if setting up a land trust could benefit you — in addition to the state’s conservation efforts — read on to learn more about this legal structure.
What is a land trust?
A land trust is an organization that conserves land and water through partnerships with private owners. These organizations are charities rather than for-profit businesses and often work with other government or nonprofit agencies to advance conservation in the region in which they operate.
Many people, however, think of a land trust as the actual legal agreement in which a private landowner partners with a public entity to conserve a parcel of their land. Think of this as the commitment between the two parties to conserve the land.
Land trusts can be recognized at either a state or federal level. For example, The Nature Conservancy is one of the most well known land trusts nationally. It’s protected more than 125 million acres of land in 70+ countries throughout its history.
More than 1,200 land trusts operate throughout the U.S. In Texas specifically, land trusts have operated since the 1960s. In that time period, according to the Texas Land Trust Council, almost 2 million acres have been conserved. That conservation includes a variety of landscapes, from prairies to wetlands, and farms to foothills.
For the most part, private landowners would mostly deal with a conservation land trust. These could either be a “fee simple” structure (where the land trust itself owns and manages the land) or as an easement (the landowner retains ownership, but the agreed-upon conservation restrictions remain in place permanently).
How to set up a land trust
On the surface, setting up a land trust might seem complicated. Other conservation programs or real estate transactions can often include a lot of red tape.
But the good news about setting up a land trust is it’s extremely simple. Typically you’ll only need two documents: a trust agreement that names a settler (that’s you) and a trustee, and a deed that transfers the property’s title to the trustee. And although it seems quite easy, we highly recommend you consult with an attorney before signing any documents.
There are more than 30 nonprofits statewide that work with Texas landowners to conserve land. Check out the Texas Land Trust Council’s directory to find land trusts in your region.
What are the advantages of a land trust?
Not all trusts offer the same advantages so it’s important to consult an attorney or your financial advisor. Here are some of the advantages you may be able gain with a land trust.
Tax benefits: While Texas doesn’t offer a state income tax credit for a conservation easement, you could still benefit at the federal level. If you decide to donate a conservation easement (rather than selling it), it can qualify as a tax-deductible charitable donation under U.S. tax law.
Environmental benefits: Depending on the type of land you own (wooded area, wetland habitats, etc), setting up a land trust could help protect endangered species, your community’s drinking water, or simply a beautiful landscape. By setting up a land trust, you’ll know that you’re helping to protect your community, state, and planet.
Agricultural land-use protection: Texas is a vital piece of the overall food and ag ecosystem in the U.S. There are nearly a quarter million farms throughout the state, and Texas exported nearly $6 billion worth of ag products in 2020, particularly cotton, beef, and dairy products. So protecting those contributions is crucial. And land trusts can help protect agricultural land-use through conservation easements. You can learn more about agricultural land easements through the USDA.
What are the disadvantages of a land trust?
You could lose your homestead exemptions. These exemptions can provide valuable tax reductions, so losing them could be a hit to your end-of-year tax bill. This is an important cost/benefit analysis to make, and we can help you consider your options at Texas Farm Credit.
You could be disqualified from secondary market loans. If you think you might want to pursue a loan in the secondary mortgage market in the future, a land trust might not be your best option. Having one will likely disqualify you from this type of loan.
What assets should not be in a land trust?
- A land trust holds physical properties, mortgages, or any other type of real property asset. But they have to be real property assets.
- A land trust cannot hold other types of assets, like cash, bonds, investments, or other types of inventory.
The bottom line: Setting up a land trust
While there are many reasons people might pursue setting up a land trust, conservation is one of the most common. And when it comes to preserving the land, water, and wildlife of Texas, it’s one of the most important.
About 83% of all Texas land is privately owned. So to protect the state’s natural resources and landscapes, private landowners will play a huge role. Setting up a land trust could be a couple of extra steps — but you’ll be helping to protect this state we all love.
If you’re interested in setting up a land trust, it’s best to contact an attorney to fully understand how the trust may apply to your specific situation.