Succession Planning For Private Forest Landowners John C. Becker Penn State University University Park PA

Overview ► What will this presentation cover? ► Why this topic differs for private forest landowners. ► Getting the plan started and completed!

Describing you as a private forest landowner ► Your age ► How long have you owned your land? ► How much land do you own? ► Are you financially dependent on income from this land? ► Is land a significant portion of your “estate”? ► What are your goals for owning this land? ► What are your future plans regarding it

Succession planning is a mix of issues involving: ► Financial planning ► Family decision making ► Land stewardship ethic ► Family relationships

Succession planning is a key function! ► Transfer assets ► Develop the commitment to stewardship ► Contrast with inheritance ► Financial needs of all parties are addressed ► Applicable to landowners of all sizes

► Succession planning is a process

Key parts of the succession planning process are: ► Increased involvement of the succeeding generation; ► Demonstrated ability of the succeeding generation to meet the goals you set for your forest land.

Succession Obstacles ► Thinking with long term view ► Self interest ► Recognizing what people want to do with their lives ► Communication: Speaking as well as listening ► Decision making ► Control over key decisions

Timing the Land Transfer? ► Is land your retirement fund? ► What is your attitude about sharing control? ► We all know of examples of people who don’t want to let go of things they control ► Transfer land at the best time to do so.

Financing Retirement Financing Retirement ► Social Security ► Investments ► Private retirement plans ► Sale of timber assets ► Sale of land; Other assets ► What do the last 18 months tell us about planning?

Family dynamics ► No retirement discussions with anyone ► Discussed with family ► Lawyer ► Accountant ► Consulting Forester or Advisor

Choosing your successor?  Generally a child is designated the successor  Successor generally working in another business  Treatment of other children or “heirs”?

Treat Children: Equal or Fair? ► Potential for Conflict. ► Options  Lifetime Sales  Purchase Option in a Will  Value the Contributions of Children  Life Insurance to non business heirs  Separate Assets among children  Form a new business; allow each child to own a share

Transfers After Death ► Through form of ownership  Spouses and non-spouses  Ownership forms ► To your intestate heirs  Who are your heirs?  The failure to plan is a plan itself! ► To heirs you designate  In a will or trust

Lifetime Transfers with Impact After Death ► Transfers to a Living Trust  Retained interest in the property  Trust Agreement/Trustee ► Transfer to a Charity  Charitable Trusts  Annuities, lead or remainder trusts  Easements ► Transfers after a person’s “life” interest ends.

Concept of a Conservation Easement ► A conservation easement is an agreement entered into between a land owner and either a government entity or land trust that restricts a property’s use to protect its conservation value.

Creation of Conservation Easements ► Express grant of an easement from landowner to easement holder. ► Easement is a non-possessory interest in the real property. ► Can apply to an entire parcel, or any portion or estate therein ► The easement holder must accept it before rights of enforcement arise

The Successor “ladder” ► Bottom rung: Allow the successor to make technical decisions: what to plant, what to harvest ► To make strategic planning decisions: when to harvest, additional land. ► To make financial decisions: sales, loans, financing ► Top rung: Control of all financial decisions.

Your Succession Plan ► Take a Hard Look at what you want to do with your forestland ► Evaluate Choices Available to You ► Identify Potential Successors or How to Find One ► Explore the Paths to Succession ► Identify Need for Assistance to Design the Plan ► Implement it. (Just do it!) ► Be Flexible if the Need Arises!

Succession planning will be successful when: ► People have compatible goals ► Both generations share stewardship skill ► Both generations are willing to make the plan work ► Families are engaged and understand the decisions that have been made

Questions