Several issues that forest landowners consider to be important were part of the fiscal cliff resolution that Congress passed a couple of weeks ago. As part of this resolution, Congress passed a last-minute farm bill extension, essentially kicking the can down the road … again.
However, Congress did make permanent some of the issues that have been a concern for landowners for the last couple of years.
- current tax rates for middle class families remain the same (except for the payroll tax increase … so much for no taxes on the middle class ?!?)
- capital gain tax rate on timber sales remain at 15% for those with incomes below $400,000,
- a patch for the alternative minimum tax (AMT) was enacted, and
- the death tax exemption for landowners did not decrease.
The death tax exemption issue was, or should have been, the largest concern for most forest landowners. Families like yours and mine own most of the forestland in America. About 20% of that land is expected to change ownership in the near future as the current generation dies. While the exemption appears to be high at $5 million, consult with your CPA or tax adviser to determine where your estate falls. Many landowners get caught because of the appreciation in their land and timber.
In a news release about the fiscal cliff deal, Tom Martin, President and CEO of the American Forest Foundation said, “The real ‘green lining’ in the deal is the permanent fix on estate taxes which will help reduce forest loss, forest fragmentation, and parcellation of America’s forestlands.”
Lack of family communication and family meetings can also contribute to these losses of forestland as well. Even with the estate tax “fix,” forestland can become fragmented at the death of the current generation owners. This may result in small parcels that become hard, if not impossible, to manage sustainably.
If you were concerned about the fiscal cliff resolution and the effect it might have had on your estate, now is a great time to have a family meeting to discuss how you plan to handle the benefits the land now provides you and your family. Congress gave you a resolution; now make a New Year’s resolution of your own to talk to your family within the next month about your plans.
As always, I am willing to help you get started with kicking off your family meetings if you have a concern about how to start. You can contact me at firstname.lastname@example.org.