Business of Forestry: Family, Finances and Estate Considerations Mark Megalos, Forestry Extension
1 - Profitability PUV Management Plan 2 - Family Legacy Uncle Sam s Policies THIS TALK 3 - FOREST ESTATE CONSIDERATIONS EXAMPLES 4 RESOURCES 5 - SUMMARY
Profitability & PUV Present Use- 20 Acres in timber production- REDUCES property tax Must Apply- January Must have a Management Plan Ensures Profitability and Forest Retention 1 st Place to Start
FAMILY LEGACY 70+ % L.O cite Family Estate to Pass on to Heirs as prime reason for owning land Wanting to protect/pass an Estate is nearly universal In press: NC forest landowners w 10 + acres NWOS 2011-13
Federal Estate Tax The $5 million estate and gift tax exclusion is made permanent. The exclusion is inflation indexed 2014 $5.34 million 2015 $5.43 million The Tax Institute estimates that only 1% of estates will be taxable.
Federal Estate Tax Taxable estate rate increased to 40%. Portability election is permanent Unused portion of deceased spouse can be used by surviving spouse Essentially Doubles Estate exemption to $11 million for married couples Election is made on a timely filed estate tax return (includes extensions)
Gift tax issues Annual gift exclusion is $14,000 for 2015 Lifetime gift exclusion amount is the same value as the estate tax exclusion, $5.43 million for 2015 5.5 m.in 2016? A powerful tool for business succession
What Will Happen With Your Forest Estate? Has your land appreciated significantly? Will it in the future? Does land have development potential? Is it pressured by growth? Do Heirs Have Interest?
What Are Your Future Goals? Have you thought about a transition plan? Have you considered the fate of your estate? Stuck on Where to Start? Overwhelmed?
Let s Start Narrowing Your Goals! Need cash (now or later)? Want to protect the land / timber? Do your children want to protect the land from subdivision and development? Want to give all or part of your Land / Timber $$ to charity?
Family Legacy / Buy-in Growing Families, Not Just Trees, ATFS
Working Lands Guide Conserving Working Lands Copy in your folder
Family Legacy: Estate Planning Review property ownership, insurance needs, and family business structure 4 Key steps 1. Develop your vision for the future 2. Determine needed future income 3. Gather info on your resources 4. Execute instruments and agreements
Sustaining a Legacy
Self-assessment
Family Legacy: The Family Meeting Who s at the table? When to meet? Where to get together? What to prepare?
Working Lands Guide Conserving Working Lands Copy in your folder
Some Potential ESTATE OPTIONS
Estate Option #1 WILL A last will and testament is the simplest and least expensive method of active estate planning. Avoids loss of income and tax benefits Peace of Mind Sound, Cool-headed, Deliberate
Estate Option #2 Partnership - or LLC Mechanism to share ownership while keeping land intact. Liability differs by type. Undivided interest in assets Can Simplify Gifts (Shares vs Acres) Can be established Now (to test viability) or Later ( control while here)
Estate Option #3 Sell or Gift to Heirs Immediate transfer options for TODAY. LAND or TIMBER or BOTH. Gifts Retain your Basis Sales- Establishes new FMV Basis Can SELL Timber NOW and share $$ as Gifts @ $14 K /year
Estate Option #4 Term or Conservation Easement Maintains ownership while restricting development, subdivision for term or forever. Tax Benefits Potential for Revenue Can Reduce Estate Valuation Provides for Certainty (Now & Future)
Estate Option #5 Sale to Public Entity Direct Sale or Bargain Sale to public entity. Immediate Revenue Potential Tax Avoidance- Bargain Solves Potential Estate Problems Provides Finality
Estate Option # 6 Institutional Planned Giving: Multiple options exist to donate real estate while providing annuity returns for retirement. Gift annuity, deferred gift annuity Annuity trust, Unitrust ( Charitable Remainder) Sale, or gift and sale.
Estate Option # 7 Al a Carte Selection of Options 1-6 MIX AND MATCH Remember Each Estate Plan in UNIQUE Matches Your Objectives Online Calculators abound to test the waters before you decide
Many Hands Make Light Work
Get Started Now! List All Assets: Accounts,Insurance Policies, Mutual Funds, Retirement Accounts, Business interests, Partnerships, Real estate (appraisals) Name/Address/Phone of attorneys, accountant, financial advisor, insurance agent, next-of-kin or preferred contact Separate list of preferences of final arrangements
GET YOUR FILES IN ORDER
Put A Team Together Now! Seek professional help! Attorney ( Estate Specialist) Banker / Trust officer (as needed) CPA / Tax Advisor / Estate Planner Insurance representative Forester/ Farm Consultant
Institutional Help is Available: Many Colleges, Churches, Universities and other Non-profits have Estate Planning if a portion or majority of your estate is left to them. A range of options are available depending upon your needs: Life Income Gifts, Charitable Remainder Trusts, Retained Life Estate, etc.
Remember: Estate Planning Isn t A D-I-Y project Estate Plans = Ongoing Process Choose an Administrator State Your Preferences
Remember: You won t take it with you!!! But, YOU can plan NOW for: a smooth transition for family, friends, and causes that matter to you Your UNCLE has a plan if you don t make one!
http://na.fs.fed.us/pubs/stewardship/preserving_family_woods_lr.pdf
http://www.srs.fs.fed.us/pubs/ah/ah_srs731.pdf
http://www.srs.fs.fed.us/pubs/gtr/gtr_srs112.pdf
www.timbertax.org/ Resources: Your land, Your legacy https://masswoods.net/sites/masswoods.net/file s/pdf-doc-ppt/ylyl_web.pdf TIES to the LAND http://tiestotheland.org/articles-land-owners Running Successful Farm-Family Meetings http://umaine.edu/publications/4802e/
THANK YOU!!!
QUESTIONS?: Mark Megalos Extension Associate Professor Ph.D. NCRF #728 ph; 919.513-1202 fax: 919.515.6883 mark.megalos@ncsu.edu