Updated “Estate Planning for Forest Landowners” publication

The following announcement was distributed via email in early March 2009 by Neal Bungard, Forest Legacy Specialist, USDA Forest Service, Northeastern Area. This is an excellent and comprehensive guide to estate planning for woodland owners.

The document “Estate Planning for Forest Landowners: What Will Become of Your Timberland?” has been finalized an the electronic version was posted on the web yesterday. This document replaces the September 1993 document of the same name.

Download the publication (180 pages) or request a hard copy at http://www.srs.fs.fed.us/pubs/31987

Description: The purpose of this book is to provide guidelines and assistance to nonindustrial private forest owners and the legal, tax, financial, insurance, and forestry professionals who serve them on the application of estate planning techniques to forest properties. The book presents a working knowledge of the Federal estate and gift tax law as of September 30, 2008, with particular focus on the unique characteristics of owning timber and forest land. It consists of four major parts, plus appendices. Part I develops the practical and legal foundation for estate planning. Part II explains and illustrates the use of general estate planning tools. Part III explains and illustrates the use of additional tools that are specific to forest ownership. Part IV describes the forms of forest land ownership, as well as the basic features of State transfer taxes and the benefits of forest estate planning. The appendices include a glossary and the Federal forms for filing estate and gift taxes.

I’ve also added this link to our Intergenerational Land Transfer page.

Tomorrow’s Wisconsin Woodland Owners

(c) Wisconsin DNR.

Yesterday, Wisconsin State Forester Paul DeLong announced the results of an important study on the future of Wisconsin’s 16 million acres of woodland.  As noted in DeLong’s letter, 60% of the individuals who own Wisconsin’s forests are 55 years of age or older, and 10% of Wisconsin’s private woodland is expected to change ownership in the next 5 years.

The Pinchot Institute’s Catherine Mater led the study, which interviewed 260 children of current Wisconsin family forest owners.  The findings clearly point to a need for innovation to engage and meet the needs of new woodland owners.

Here are some highlights from the study’s Key Findings page:

• Male and female offspring interact differently in the Wisconsin family structure when it comes to participation in the management of family forests.
• No matter the gender, Wisconsin offspring expect to inherit the family forestlands and they expect that they will be required to manage the lands jointly with their siblings.
• Depending on gender, income generation may or may not be important for the next generation.
• Sibling disagreement may already be more advanced than one might think.  Fifty percent or more families with multiple children had siblings who disagreed in three critical areas:  wanting to be involved in the management of the family forest, knowing how the family forestlands will be transferred, and identifying what conditions would force them to sell the family forest.
• Forest health and human health: no longer disconnected.
• If you want to really connect with the next generation of landowners, figure out what they tune into and what they tune out.
• Offspring look to the DNR and extension.

The study’s website includes much more detail about study background, methods, results, and how to talk to your family about the future of your land.  (An additional, excellent resource on this topic is the Oregon State University Ties to the Land program.)  This is required reading for not only woodland owners, but also Extension and other professionals serving them.

Reflections on 2008 Intergenerational Land Transfer workshops

Adams family members with the big white pine. Photo (c) David Adams.

With his wife, two adult children, and a nephew next to him, David Adams described his favorite spot on the family woodland:  Sitting under a 45-inch diameter white pine as it sways in the breeze. David has sat under that tree for decades and dreams of the tree, and the land, sheltering his family long after he’s gone.

David and his family attended an Intergenerational Land Transfer workshop this spring to learn how to keep the land in their family’s ownership.  Sound straightforward?  Intergenerational land transfer is anything but.

Transferring ownership of assets between generations can be fraught with legal, financial, and personal challenges. As a consequence, many families are forced to subdivide and sell land that they’d prefer to keep intact and in the family’s hands. This is one factor leading to a reduction in Minnesota’s average woodland ownership size.  This trend, in turn, impacts recreational opportunities, wildlife habitat, and land productivity.

In order to help families navigate the land transfer process, the Woodland Advisor program offered four two-part Intergenerational Land Transfer classes in 2008.  This post reports on our experience with the first round of classes, lessons learned, and next steps.

The Woodland Advisor curriculum is designed to help woodland owners think about how both they and their heirs feel about the future of their land and to become familiar with some basic tools to achieve their vision. Based heavily on Oregon State University’s Ties to the Land and the University of Minnesota’s Who Gets Grandma’s Yellow Pieplate curricula, we emphasize the human side of land transfer: Personal values, family dynamics, and the importance of communication.

(c) Oregon State University

Content is presented during two three-hour evening workshops.  Part 1 included a presentation and discussion led by two Extension Family Resource Management educators.  Participants go home with a number of handouts including the Ties to the Land workbook and DVD, a workbook about transferring nontitled property, and a number of handouts (reproduced with permission) from the USDA Forest Service, Northeastern Area’s Estate Planning Options for Family Forests site.  Their assignment is to review the numerous handouts, clarify their personal vision, and begin (or continue) conversations with their heirs about their visions and values relative to the land.

In part 2, presenters were Clint Bentz and Allison Eklund, both of whose participation was supported by the Blandin Foundation.  Clint is a nationally known Certified Public Accountant in Oregon specializing in land transfer and principal author of the Ties to the Land curriculum.  Allison is a Minnesota attorney and woodland owner.  Clint’s presentation addressed the basic forms of land ownership and principles of estate planning.  Allison focused on specifics of Minnesota’s Limited Liability Statute.  We closed with a 45-minute open discussion and Q&A.

We charged $100 per family to attend both workshops.  We encouraged registrants to bring as many family members as possible for no additional cost.

The workshop focused participants’ thinking and encouraged action.  Wrote one participant “[t]hanks for a great class last spring, we have had a number of conversations and are getting a clearer idea of each person’s wishes for the future.”  This discussion thread was initiated by another attendee.  Onsite written and verbal evaluations were very strong.  Both parts of the workshop were well received, and participants particularly appreciated the focus on family dynamics and communication.

Woodland Advisor program organizers are reviewing evaluations and making improvements to the curriculum based on their experience with these four workshps.  They plan to offer additional Intergenerational Land Transfer workshops in 2009.  Click to view a calendar of upcoming workshops.

Woodland Advisor is a program of the Minnesota Forestry Association, University of Minnesota Extension, and the Minnesota Department of Natural Resources, Division of Forestry.  The Blandin Foundation also provided important financial support for the delivery of the 2008 Intergenerational Land Transfer workshops.

Intergenerational Land Transfer

Many family forest owners envision their land staying in the family for generations. But does your family share your dreams for the future of your land? Do you have a plan in place to keep the land intact?

This page should help you think about transferring your land to members of your family, other individuals, land trusts, or others. Planning ahead can be the difference between keeping the land intact and your heirs being forced to break it up to pay the taxes. Content on this page is based in part on Oregon State University’s Ties to the Land curriculum.

Your vision and goals

First and foremost, you need to have a clear idea of your vision for the future of your property. Is the land a priceless heirloom that you hope will always be part of the family? Or do you see it as a valuable asset that your heirs may legitimately decide to sell? How would you feel if the land were to be subdivided and sold?

Your family

Once your vision is clear, you need to know how your potential heirs feel. Do they share that vision? Are they as tied to the land as you are? Do they know enough about land stewardship to take over? Land stewardship is not easy, and if your heirs don’t share your knowledge and commitment to the land, your vision may be less likely to succeed.

Your heirs may be unaware of your vision, or about their possible roles. They may hope and dream of future land ownership but be uncomfortable approaching you about your plans for the land. Change is hard to discuss, particularly when it involves losing loved ones and cherished assets. (Read more about how to plan a family meeting.)

But, communication is key. It’s hard to overstate the importance of clear communication about your vision and how your heirs fit into it. The earlier you start, the better: Involve grandchildren in the land. Help their parents understand how important the land is to you, and help them build the knowledge and confidence they need to manage it well.

Legal and financial issues

Once your family agrees on a shared vision, it’s time to talk to a land transfer professional. Many options exist for the permanent protection and ownership of your land. Some options are as follows (modified from the Ties to the Land workbook):

• Sole ownership / sole proprietorship: This is the simplest arrangement, but can leave the owner vulnerable to liability. Income is reported directly on the owner’s tax return. Read more.
• General partnership: Under a general partnership, more than one individual owns the business. Each partner is individually financially liable. Income is reported on the partners’ individual tax returns relative to the share of ownership.
• Family Limited Liability Corporation: If the family prefers to retain all ownership rights, an LLC can confer some legal and financial protection, set mutually agreed rules for future land stewardship, clarify ownership, and establish operating and decision processes. Taxation is the same as in a general partnership.
• Family Limited Partnership: This is a partnership made up of family members. Under an FLP, the general partners can begin sharing ownership with their heirs. Taxation is the same as in a general partnership.
• S- and C-Corporations: These are federal and state designations that combine some elements of partnerships and some of corporations.

You can read more about forms of land ownership here. Each form of ownership has advantages and disadvantages. Each family situation is different, and different forms of ownership may be better suited to some families than others. These are complicated decisions, and professional assistance is essential.

In addition to the form of ownership, many other financial and legal tools may be available to advance your family’s vision. For instance, conservation easements ensure permanent land protection.

Learn more at an intergenerational land transfer class

The Woodland Advisor Program offers a two-part intergenerational land transfer class. Each two-part class includes instruction from Extension foresters, Extension family resource management educators, a certified public accountant, and an attorney.

Registration costs $100 per extended family, including two excellent workbook handouts and opportunities to pose your questions to land transfer professionals. More details on these classes are posted on the Woodland Advisor class calendar.

Other sources of information

A new website at Oregon State University called Ties to the Land may help you begin your planning.

The July/August 2007 issue of Tree Farmer Magazine includes an excellent article called Preserving the Family Forest (PDF, 400KB).

Another great resource is Estate Planning Options for Family Forestsfrom the US Forest Service.