Estate Planning Issues for Forest Landowners

Forest landowners face unique planning challenges and opportunities because they must plan for an asset that is unlike any other. Many investors include real estate as part of their portfolio. However, owning a family farm or forestland is very different from owning a shopping center or shares in a real estate investment trust. Several of the specific issues faced by forest landowners are outlined below.   

High Value and Low Liquidity. Many forest landowners have assets valued well into the millions. However, when faced with the need for cash, rural landowners cannot simply call their stock broker. The sale of timber or the land itself is often the only source of income from this asset. Without proper planning, an unexpected death or a sudden financial emergency can force the sale of land or timber at an inopportune time. 

Irregular Income. Timber markets, timber rotations, tax issues, and weather conditions are just a few of the factors that play into the proper timing of timber sales. It is important to understand these factors in order to properly plan for forest landowners. Without thoughtful planning and knowledgeable advisors, forest landowners may lose thousands of dollars due to the timing of a sale, lose productivity due to logging damage, or pay thousands of dollars in unnecessary taxes.

Keeping the Property in the Family. Many, if not most, forest landowners identify a desire to keep their property in the family as one of their estate planning goals. Estate plans are not one-size fits all. Sometimes a simple will leaving land to your spouse and then to your children jointly is not enough to ensure that this will happen. This is particularly true when a surviving spouse with very little income inherits land. Fortunately, there are many effective tools that can be used to transfer your property while preserving your goals and objectives.

Division Between Beneficiaries. “Love of the land” is a concept that most forest landowners understand. Some of your loved ones may share you love of the land and some may not. Deciding how to divide assets between children who have different interests is a tough decision for many landowners. An equal division of land outright to your children is not always equitable. It also may not accomplish your goals. There are many ways to equalize gifts to your beneficiaries and still maintain your long-term plans for your property. 

Protecting Your Beneficiaries. Leaving an outright inheritance to a beneficiary can be fraught with problems and unintended consequences. Bankruptcy, divorce, lawsuits and bad decisions are serious threats to your management plan. Leaving land to your children as tenants in common if fraught with danger. However, with proper planning, you can ensure that creditors, ex-spouses and addictions are not able to reach your legacy.