Estate and Succession Planning
There are about 276,000 woodland owners in Wisconsin, and according to a Wisconsin Department of Natural Resources study, about 60% are 55 years or older. About 49% of woodland owners are already retired. In addition to planning for your retirement, are you planning for the future of your woodlands? Believe it or not, they go hand in hand. Planning for your financial future and long-term care involves your woodlands. And planning for the future of your woodlands can help ease any financial burdens on your heirs and keep your woodlands intact.
Passing property on can be a financial and emotional burden, and the best way to ensure this process is a smooth one is by planning ahead. Succession and estate planning are your tools for making sure things go smoothly. An estate plan is a legal tool to guide the transfer of property from an owner to their heirs. A succession plan is the process prior to and following the creation of an estate plan; it is more about communication and providing your heirs the tools they will need for a successful transition.
To begin this process, you will want to assemble a team of professionals. This team, at the simplest, should include an attorney, an accountant, and a forester. At best, they should all be familiar with forestry issues. You may also want to include trust officers and financial planners. If you need assistance with family conversations on this topic, you may want include a professional facilitator or someone from outside the family to assist. We tend to be more polite to each other in the presence of strangers.
Start a conversation with your heirs, and find out what the woodland property means to them and their interest in taking over ownership in the future. Remember that fair does not always mean equal. It is quite possible that some family members would rather have something else than woodland property, and recognizing this can prevent the sale or division of property in the future when one person wants to get out of ownership. Be honest with what is at stake financially so that family members can admit if they are not in a financial position to own property. If that is the case, there are alternative ways to pass on property that will instill less of a financial burden.
The next step is to set up a legal framework for passing on the property. Wills and trusts are two ways that property can be distributed. There are also a variety of forms of ownership including Partnerships, Limited Liability Company (LLC), Joint Tenancy, and Family Limited Partnerships. It is best to work with an estate planning attorney to understand how the options affect ownership, and what role all your assets may play into which legal framework is best for you. It is even better if you can find an estate planning attorney with experience in forested land.
Once you know who will take ownership of your property next and how, you need to start giving them the tools to continue your legacy into their tenure. This includes sharing your passions and plans. Get your heirs out on the property for fun and work; giving them the experiences they will need to make future decisions.
Land Trusts and Conservation Easements
Land trusts are community-based, non-profit conservation organizations that work to preserve private land through land purchases, bargain sales, land donations, and conservation easements. Land trusts generally conserve land of significant ecological, open space, recreational, scenic or productive value, such as wetlands, farmland and unique geological formations. There are currently over 40 community-based land trusts across Wisconsin. There are also several statewide land trusts in Wisconsin, including the Ice Age Park and Trail Foundation, the Wisconsin Farmland Conservancy, and the Nature Conservancy. Gathering Waters, Wisconsin’s land trust service, was formed in 1995 by a group of Wisconsin land trusts. Their goal is to help educate the public and landowners about options for conserving private lands, to provide technical assistance and training to help set up new land trusts, and to build the capacity of existing conservation organizations.
Conservation easements are a way to retain ownership and use of your land while preserving its natural and historical values. A conservation easement allows you to influence the future use of your land (such as prohibiting or limiting development) even after sale of the land or your death. To be eligible for tax benefits, a conservation easement must be perpetual (permanent). If donated, the value of the easement is then deducted from your adjusted gross income, reducing your income tax. Private non-profit organizations, such as land trusts, may accept donated or purchase conservation easements. For more information on land trusts and conservation easements, check out the Gathering Waters Conservancy website.
The Managed Forest Law (MFL) Program
The Managed Forest Law is a state program that encourages long-term sustainability of private woodlands through a tax incentive. In exchange for having and following a written forest management plan, landowners receive a reduced property tax rate on enrolled woodlands. On average, in WI, productive forest land is taxed at $34/acre. This same land, in MFL, is taxed at $1.90/acre for open land, and $9.49/acre for closed land along with a small tax on any income from a timber sale. (Open land is open to the public for limited recreational uses: hunting, fishing, hiking, sight-seeing, and cross-country skiing.) To be eligible to enter the program, you must enter a minimum of 20 acres of woodland, and work with a certified forester who will write a management plan. For more information on this program, check out the WI Dept. of Natural Resources website.
Taxes are a burden we must all manage and, even if you haven’t had a timber sale with some income, the National Timber Tax website can be a valuable tool for every woodland owner. The site discusses the difference between owning woodland for personal use, business or investment property and associated taxes. Depending on how to hold your property, you may qualify for deductions for planting and costs associated with maintaining your forest. (That chainsaw you just bought might be deductible.) The US Forest Service maintains the site which provides annual tax fact sheets, and also has other resources including archived webinars and more publications. This would also be a good website to share with your CPA. An overview of federal income tax issues related to woodland property is located on that site as well. The Forest Service produces a Tax Tips fact sheet each year.
Laws Related to Woodlands
There are several laws in Wisconsin that relate to woodland owners and use of property.
Trespass Law (Wisconsin State Statute 943.13 1997) defines trespass as “anyone who is on your woodland property without permission”. In 1996, the law was changed to place the burden of knowing property boundaries on recreationists; landowners are not required to post their property.
Recreational Use Statute, also known at the Berry Picker Law, “limits private property owners’ responsibility for injury to people who use their land for recreation”. This is relevant if you give permission to others to use your property, or if the property is categorized as open under the Managed Forest Law. If you accept payment (such as a hunting lease) of more than $2,000 for use of your property, you are excluded from this law. Consider liability insurance if you host recreational users on your property.
The Fence Law applies to woodland owners with property bordering agricultural lands. If the neighboring property is used for grazing or crops, woodland owners may have responsibilities for fencing. Payment of fencing is divided equally along the boundaries requiring fencing. The law defines fence materials, who is responsible, and what to do if both parties agree not to fence.
To protect yourself and your property, it is recommended that you regularly walk your property boundaries. To learn more about boundaries and these three laws in more detail, watch the self-paced session below.
Related Blog Posts
Passing the land on to others
Know your property boundaries
Trees, fences and good neighbors
Mapping your property
It’s all in the planning
Explore Your Woods Together
Engaging the Next Generation
It’s A Beautiful Day to be Neighborly
10 Ways to Protect your Woodland Property
Timber theft article
Recreational Use Statute
Estate and succession planning section of our publications
Investments section of our publications
Income tax section of our publications
Managed Forest Law (MFL) section of our publications