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This is the second of eleven articles in the series "Preserving the Family Forest"
It is recommended that you read these articles in sequence.

As you read in our last article “How Clear Is Your Vision”, David emphasized developing a higher level vision statement for your property/business. Many of you probably related to his example of “Maximize the long-term revenue potential of the timber resources for current and future generations of our family”.

Now that you have determined your “destination” it’s time to get down to choosing the appropriate route to arrive at that destination. This is where most people start feeling totally overwhelmed with all the options available to them or at a total loss of where to begin. The easiest thing to do is to procrastinate until it’s too late. But that’s really not an option. Why do we procrastinate?

  • The average landowner is busy with the day to day business of running the farm; they don’t have time to sort through all of the rules and laws associated with planning for the transition and continuation of their farm.

  • We don’t know where to begin.

  • We don’t want to think about our own mortality

  • We are hesitant due to the perceived complexity of the process itself.

Well. I won’t lie to you, the process can be time consuming and sometimes even emotional. That’s why it is so important to enlist the help of qualified professionals, a team of experts ready and willing to help you plan for the accomplishment of your goals. This team consists of a Certified Public Accountant (CPA), an estate planning attorney, a financial planner and possibly an insurance representative. Experience and a knowledge of timber farming is obviously a plus when choosing the team members.

Financial Planner: Typically, the financial planner will be the quarterback of the team, the expert with knowledge of the overall planning process and a general knowledge of tax laws and legal strategies, though not qualified to provide legal advice or specific tax advice. You should seek out a well-qualified planner with a designation such as Certified Financial Planner Practitioner (CFP®), Chartered Financial Consultant (ChFC) or Life Underwriter (CLU). They have extensive training in all areas of financial planning and can help draft effective strategies to accomplish your goals. In most cases, the planner can act as the insurance expert as well.

Estate Planning Attorney: This is the member that will draft any legal documents and make the required filings you may need to ensure your wishes will be carried out. In addition, a competent estate planning attorney can provide legal advice on a wide variety of issues (real estate contracts, corporations, partnerships, etc.). A word of caution here. The adage, “You get what you pay for,” is especially appropriate in the choice of an attorney. I advise against getting your brother-in-law that handles divorces or traffic tickets to do this work to save money. They usually are not as up to date on the estate laws as an attorney specializing in that field would. Keep in mind; the legal documentation of an estate plan is like the wooden framework of a house – if it isn’t sound, the home will not stand… no matter what you do afterwards.

CPA: This is your tax expert and, as we all know, taxes are a huge part of the equation. The CPA is the person you can rely on to guide you through very complex mix of tax laws and choices. Not only can he help ensure you are not paying any more taxes than you are legally responsible for in your business, he will also ensure you are properly reporting/computing your cost basis to minimize taxes on future sales of timber, or on the transfer of the ownership of the tree farm. Estate planning will often involve income taxes, capital gains taxes, gift taxes, estate taxes (state and federal), and possibly generation-skipping taxes. You need competent help in this area. Just as in the discussion on selecting an estate planning attorney, you need an accounting professional who is experienced in these matters, not just someone who can file a basic income tax return. Ask about their experience in estate planning matters, as well as farming matters. The more the team members understand your specific situation, the better.

Over the course of running your tree farm, you may already have established some relationship with one (or more) of these advisors. If these professionals are competent in estate planning, and you trust them, you are off to a good start. As you formulate your vision and begin to search out and select the other team members, it is important to remember that this needs to be a team effort. There are just too many different areas of expertise required for one advisor to do it all. Therefore, it is important to assemble team members who are willing and able to work together … to work for you. The future of your woodland depends on it.

( Go to the next article "Communicating with Heirs" )

The author, David Watson, is a financial advisor specializing in working with rural landowners, sportsmen and conservation-minded families.  D. A. Watson & Company, 17263 Wild Horse Creek Rd., Suite 202, Chesterfield, MO  63005, 636.230.3900, 888.230.3999

All investing involves risk including the potential loss of principal. Specifically, investing in timberland is subject to substantial price fluctuations of short periods of time and may be affected by unpredictable property and timber valuations and supplies. The market for timberland is widely unregulated and concentrated investing may lead to higher price volatility and there may not be a secondary market available for this product.

Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary.  This information is not intended to be a substitute for specific individual tax, legal or investment planning advice. Please consult a qualified professional for legal advice/ services.

Securities offered through Royal Alliance Associates, Inc., Member FINRA & SIPC. Royal Alliance Associates, Inc. does not offer tax or legal services.

Advisory Services offered through Pines Wealth Management, LLC, a Registered Investment Advisor, not affiliated with Royal Alliance Associates, Inc.

D. A. Watson & Company is not affiliated with Royal Alliance Associates, Inc., nor registered as a broker-dealer or investment advisor.

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