Estate Planning

Estate planning is a very personal process involving legal counsel and family members. Timberland is usually a "highly appreciated asset," that is, the fair market value of the property on the date of death of the decedent is much greater than the basis of the property. This "built-in gain" is why timberland is a "wealth creation vehicle," but this adds a challenge to the estate planning process, albeit a nice one to have. The challenge is to pass this wealth to lineal decedents or other beneficiaries without incurring an income tax liability on the built-in gain, and minimizing any estate taxes. Aside from federal estate taxes, the federal gift tax can be also be included in this category if a gifting program is part of an estate plan. A less dramatic catch-all term is "transfer taxes." Your state may also have estate and inheritance tax programs to deal with.

Minimizing transfer taxes tends to dominate discussions of estate planning, but this is only one aspect. Other considerations include support and care of a surviving spouse, the needs of children, and helping favorite charities, among many others. Many timberland owners are also concerned about what will happen to their timberland after they die. Maintaining a balance between natural and developed areas is also a major concern of private organizations such as land trusts, and public agencies such as the U.S. Forest Service working in cooperation with state agencies. The forestry community tends to discuss the intergenerational transfer of timberland in terms of continuity of forest management. While it's not possible for a timberland owner to literally "rule from the grave" there are options available to increase the likelihood that the land will not be converted to housing subdivisions or second home sites.

Any estate plan must of course start with the goals to be achieved. The next step is an assessment of the assets available to achieve these goals and whether these assets are adequate to do so. Once the fair market value of assets are tallied it's possible to deal with the question of whether or not your estate will potentially be faced with a Federal estate tax liability. If a majority of your assits will pass-on to a surviving spouse you most likely do not have an estate tax issue. This assumes that you place very limited, if any, restrictions on what your spouse can do with these assets. But, if significant wealth is involved the estate tax issue must also be considered for the surviving spouse's estate, frequently the bigger challenge.

The following sections provide basic information that you can use to inform your discussions with your attorney and family as you develop your estate plan. The information provided is not sufficient for do-it-yourself estate plans and associated legal documents.

  • Goal Setting (under development)
  • Assessment of Assets (under development)
  • Estimating Potential Estate and Gift Tax Liability (under development)
  • Some Basic Strategies (under development)
  • Keeping it Green after Your Gone (under development)

Estate Planning Guides:

Estate Planning for Forest Landowners - What Will Become of Your Timberland? 2009. Siegel, Haney and Greene

Ties to the Land - Your Family Forest Heritage: Planning for an Orderly Transition

Estate Planning Opportunities and Strategies for Private Forest Landowners (by Michael G. Jacobson and John Becker, Penn State) NOTE: Some of the information in this publication is out of date and does not reflect current law.

Conservation Easements:

Role of Conservation Easements in Estate Planning - (coming soon)

Estate Tax Resources:

Farm Credit System Bank Interest Rates

Historical Rates for 2009 - Current

Estate Tax Statistics for 2005 - The IRS has posted to its website the statistics for estate tax returns filed in 2005. Browse to http://www.irs.gov/taxstats/ and click on "Estate and Gift Tax" under "Individual Tax Statistics." Although forestland is not broken out separately, the data provides an overview of the impact of the federal estate tax. A total of 39,481 returns were filed. Of these 18,431, or 47%, showed tax due. Fifty-four percent of returns were for decedents with a gross estate between $1.5 and $2.5 million. The largest asset category was non-closely held stock, totaling over $34 billion. compared to just under $6 billion for closely held stock. Farm assets totaled $1.2 billion, and real estate other than personal residences was reported in 25,125 returns and totaled $22.8 billion in value.

Allocation of Stepped-up Basis - Basis For Income Tax Purposes of Assets Inherited From Decedent's Dieing After December 31, 2009...|continue|

Estate and Gift Tax Law: Changes Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (PDF)

Federal Taxation of Estates - (coming soon)