Taxation and Estate Planning

Taxation of forest property and forest management activities is controlled by both the state and federal rules. Concerted effort and record keeping is required to minimize overall tax payments and coordinate between capital gains, timber yield, and property taxes. Eventually ownership of forest land is passed on to the next generation. Good estate planning can save heirs thousands of dollars and may prevent the selling of parcels or heavy logging to pay estate taxes. This is particularly true in California, where land values are high and many forest landowners are land rich and cash poor. Estate planning and wealth transfer requires a holistic approach and can utilize a number of tools including living trusts, gifting, family partnerships and conservation easements.

An overview of these topics is provided below, however, landowners are advised to seek the services of a professional tax consultant used to working with forest land tax and estate issues.

Forest Stewardship Series 22 - Forest Taxation, Estate Planning and Conservation Easements

Resources:

Taxation:

California’s Timber Yield Tax program sets the harvest value of timber and collects an in lieu tax when it is harvested. The revenue from this program is allocated to the counties where the timber was harvested. Fore information on timber harvests by California counties and the annual yield tax site, see this California Board of Equalization website.

The National Timber Tax Website was developed to be used by timberland owners, as well as a reference for accountants, attorneys, consulting foresters and other professionals who work with timberland owners regarding the tax treatment of timber related activities. Read their publication on  Timber Casualty Loss Tax Deduction for 2011 here.

Estate Planning:

Ties to the Land is a forestland succession planning curriculum developed by Oregon State University. It is made up of several integrated components including a structured process for communicating with family members about forestland succession.The curriculum recognizes that passing forest land on to the next generation is a process of financial, legal, and emotional dimensions. Whether the property is to stay in the family, be given protection in a conservation easement, or another agreed-to outcome, family communication is critical.

The UC Berkeley Center for Forestry held a series of Ties to the Land workshops for forest landowners in Fall 2011/Spring 2012. For more information, see the past event webpage or http://ucanr.org/tiestotheland/.

CalFire published an issue of the Forestland Steward newsletter on  Forest land succession planning in Spring 2011.