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                         From the Michigan Society of American Foresters

Special Management Considerations
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Intergenerational Land Transfer

For thousands of Michigan citizens, forest land ownership is considered a valuable asset beyond its timber supply.  These lands are used extensively for hunting, fishing, birding, and their recreational pursuits.  According to a survey of Michigan’s family forest owners conducted by researchers at Michigan State University, about 70% of landowners considered passing their land on to their children or other heirs to be very or somewhat important to them.  The latest National Woodland Owner Survey also found that over 60% of forest owners are older than 55 years of age.  This suggests that a large portion of family forest lands will transfer ownership in the next two decades.  Although most offspring expect to inherit the family’s forest land, less than half are interested in actively managing those forests.  They may also not be prepared for the unforeseen expenses of this family land, or the potential financial emergencies that may lead them to sell it off for immediate cash needs.

To avert the parcelization and fragmentation that these land “disposals” create—not to mention the loss of a family heritage—aging forest owners must be able to articulate their desires to family members, and plan for the inevitable legal and financial events that come with ownership transfers.  Talking about what should happen upon a parent’s death is a very difficult conversation to have.  Taking small steps toward family forest succession planning can help ease the process.

A first step in this process should be to construct a property overview that includes the latest forest management plan.  This overview should contain the legal and financial descriptions of the property, and a history of any timber sales or other management activity that has taken place on the land.  An appraisal of the property’s fair market value should also be included.  If this hasn’t been done for some time, it may be surprising to discover how a property can increase in value.  An heir can potentially inherit his/her parents’ land and end up facing steep inheritance taxes based on the market value of the land.  Knowing the land’s value and financial history before such a transfer can help parent owners and their offspring plan accordingly.

Another important step includes discussing the personal values each family member has for their forest land.  Oregon State University Extension describes an “Heirloom Scale” that helps owners articulate their personal value of the forest property.  The scale ranges from 1 to 10, where a 1 represents a relatively low heritage value toward the property, and a 10 represents the other extreme—the owner feels the property should be protected and remain in forested conditions at all costs.  This simple tool can help spouses and other family members begin the conversation about their shared and individual interests in the family forest.  

Current owners of the family forest should also discuss and document their long- and short-term goals for the property.  What do they want to see happen in the next 10, 20, and 30 years?  What challenges could stand in the way?  What are immediate goals?

Children of forest owners may not seem particularly interested in acquiring the property.  This may be due to several factors, such as a reluctance to talk about their parents’ mortality, or guilt about wanting the property for themselves.  The conversation can begin by sharing their passion for the land and using the Heirloom Scale and goal outline as a starting point.  Perhaps there is one child who seems to express a special interest—he or she can then be “groomed” for leadership on the property by passing on the parents’ knowledge and experience to him/her.  If none of an owner’s children seem interested, perhaps there are grandchildren with whom that passion can be shared.

Forest owners can also create a legal structure for ownership, and invite their children to participate.  There are currently three main types of ownership structures that can be applied to forest ownerships: a family partnership, a closely held ‘S’ corporation, and a limited liability company (LLC).  For more details on these options, consult an attorney who knows how to plan for woodlands as part of an estate. 

Although using one of these legal structures can help transfer ownership to children after parents have died, it does not address the potential increase in tax burdens many face when inheriting property.  If this is a concern, establishing some form of land trust or easement as part of the legal structure may be of value.  These easements can alter the assessed value of the land, thus making the tax burden lower in many cases.  Many forest owners are leery of these easements in part because there is the misperception that they would no longer be able to actively manage their forest land.  But an easement can be specified in any way the forest owner wishes, allowing for continued management.  The legitimate concern is that these easements are made in perpetuity, which will ultimately limit what a forest owner’s heirs can do with the property in the future.

As with forest management and planning, any of these legal activities related to ownership and structure should not be pursued without professional advice.  In addition to an attorney, a forest owner should also have an accountant that is familiar with forest income and tax liabilities, as well as a forestry consultant who can work with the rest of the legal “team” members.  All of this planning requires money, but will be well worth the investment if a family’s forest lands are to be maintained as a valuable part of its heritage.


Forest owners pay property tax on their land.  While specific taxation information changes regularly, and consulting a qualified tax preparer is strongly recommended, there are some basic ideas that can help sort out some of the issues.  In Michigan, there are two forest management programs that reduce private property taxes in exchange for timber management.  Both require an approved forest management plan and have additional eligibility requirements.  Both have penalties for withdrawal.  Each should be considered carefully before entering the program.  The Commercial Forest program offers the largest tax reduction but the property must be open to the public for hunting and fishing – foot access only.  The Qualified Forest Property program allows owners to exclude the public but does not have as large a tax reduction.

Taxation on timber sale income is sometimes not considered when scheduling a timber sale.  The federal Internal Revenue Service (IRS) has special rules that allow some potentially substantial reductions in gross income.  A portion of the original purchase price (timber basis) of just the timber can be deducted (timber depletion).  Also, many timber sales are eligible for treatment under capital gains rules, which is more favorable than ordinary income.  Lastly, many out-of-pocket expenses can be deducted from the timber sale.  Again, consulting a qualified tax preparer is strongly recommended.

A number of government cost-share programs are available to forest owners.  Enrolling in one or more these programs may have impacts on income taxes.  Costs associated with tree planting also has special IRS consideration.  Working with your tax preparer can help you sort through available options. 


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This website is maintained by Bill Cook, Michigan State University Extension Forest in the Upper Peninsula.  Comments, questions, and suggestions are gratefully accepted. 

Last update of this page was 9 January, 2014




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