Preserving small forestland through estate planning

Preserving small forestland through estate planning
Forestry experts are emphasizing the importance of estate planning to help maintain family tree farms. Photo: freepik.com

The 20th anniversary of the Forests and Fish Law has coincided with renewed concern among policymakers regarding the health of small forestland owners who are disproportionately affected by the state law – and the loss of working forestland as a result. At the same time, some forestry experts are emphasizing the role of estate planning, which they say is overlooked, yet critical to the industry.

While it’s unknown to what extent the lack of estate planning has contributed to forestland conversion, Washington State University (WSU) Regional Extension Specialist and Forestry Team Leader Andrew Perleberg told Lens that it can still be detrimental to the industry’s health. Perleberg has taught forestry for 20 years, worked on estate planning since 2007 and through WSU recently hosted a family tree farm estate planning workshop in Ellensburg.

“I’ve been pretty much aware of the importance of estate planning the entire time (as a forester),” he said.

Years ago, he said estate planning was vital due to taxes. “I would get calls from landowners saying they had to sell half their land because they had to pay the property taxes. Other times they had to clear-cut or liquidate all the timber just to pay the estate taxes; two things easily avoided if they had just organized their assets better. But they never talk about it.”

The effect of what is known as “death taxes” on forestland owners was a topic examined years ago by Oregon State University (OSU) Assistant Forestry Professor of Practice Tammy Cushing when she was a graduate student.

She told Lens that at the time “there was definitely some evidence that people were selling in order to pay the estate tax.” And though it has become less of a problem due to a higher federal exclusion amount, that has also “lulled people into not worrying about it.”

With a background also as a tax specialist,  Cushing heads OSU’s Ties to the Land program, which helps tree farm owners with estate planning. “It became less about teaching people how to navigate and how to plan to avoid the estate tax issue.” She said it’s “how to prepare the family to move from (one) generation” to the next.

“It’s about having a conversation about how ‘I’m not going to be around forever’. Nobody wants to talk about that.”

While tree farm owners must navigate the complexity of the Washington Forest Practices, that may be less challenging than discussing wills and future property ownership among family.

“Most people say it’s easier to go out and grow trees,” Perleberg said.

Factors that can complicate planning include competing desires among family members over what to do with the property, especially if its development value is more appealing. Or, there’s just a simple lack of interest in forestry.

“I understand how important these lands are to the present owners, but I also get to talk to the heirs or the grownup kids or grandkids,” Perleberg said. “Often times one thinks something completely different than the others. Parents may have no idea that the kids were at all interested in the family farm.”

There are also misconceptions about how to preserve the forestland, he added. Subdividing the parcels into equal shares may seem fair, but “fair is not equal, and vice versa. It’s about understanding what you want as a family in the future, … or helping your grown kids understand why you own the land. Beyond that, it’s about why you think they should own the land.”

Other times, “the kids don’t stay at home necessarily,” Cushing said. “They could move three states away. It may not be in their life plan to be managing a tree farm if they want to go and raise their own family. If you say, ‘I’m leaving it to my kids’, that’s not an undivided interest. That does create the problem where I’ve got three kids and they don’t all agree.”

The fate of the forestland can depend on whether the family members can find common ground, according to Family Forest Foundation (FFF) President Ann Stinson. “It’s not about money. It’s about who gets along with whom, and how does each person view the land. Is it an heirloom? Is it purely an investment? What is this thing that we have?”

An advantage of estate planning is that the tree farm owner can “be the guiding light of the family,” she added. “I think a lot of people wait too long. The sooner you can do it with the family, the better.”

When planning doesn’t happen, Perleberg said usually the farm gets sold. However, it’s fate after that is not well known, whether it’s sold to a new owner, subdivided or converted to other uses.

Nevertheless, Cushing says the lack of planning likely remains a widespread problem. “We have some really engaged forestland owners. In that group they’re reading the materials, they’re hearing it’s important, but even some of them acknowledge…they haven’t necessarily done it. Those are most engaged people.”

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