There are a number of federal and state programs available that will help defray a a significant portion of the cost to implement forest practices. This section provides an overview of the different types of cost-share programs available as well as how they are implemented.

Most cost-share programs are implemented in a similar fashion. Eligible landowners can apply for specific practices through their local forester. The actual application may go through the Maryland Forest Service or the Farm Services Agency, depending on the program. If the practice is approved, landowners complete the practices and pay for the goods and/or services. The local forester will then inspect the practice to ensure proper implementation. Upon approval by the forester, copies of the invoices and checks used to pay the invoices are submitted to the forester for processing. The landowner will then receive a reimbursement check for the percentage of the costs that were to be covered.

Although links are provided below for programs available, a good place to start is the state forester located in your county. Please read more at the Department of Natural Resources Forest Service web site for further details.

• Conservation Reserve Program (CRP) - Created by the 1985 Farm Bill, the Conservation Reserve Program is designed to protect highly erodible and environmentally sensitive lands with grass, trees, or other long-term cover.  The major goals of CRP are to reduce soil erosion and sedimentation, improve water quality, maintain fish and wildlife habitat, and provide income support to farmers.  This program offers a 50% cost-share to establish trees or other cover crops, as well as annual rent payments for 10 to 15 years while the practice is being maintained.  Additional cost-share payments may be available depending upon the state and the practices (for example, restoration of wetlands or planting hardwood trees).  The land must be located in a CRP Conservation priority area and be devoted to beneficial environmental practices or be expiring CRP acreage.  Applications are ranked according to an Environmental Benefits Index.

• Conservation Reserve Enhancement Program (CREP) - The purpose of the CREP program is to conserve soils, protect wildlife habitat, and protect the quality of surface and subsurface waters by planting vegetated filter strips or forested riparian buffers along streams, sinkholes, groundwater recharge areas, wetlands, and other permanent water bodies.  CREP funds may also be applied toward recreating prior converted wetlands and farmed wetlands and to retire highly erodible lands within 1000 feet of water bodies.  This program offers a 50% cost-share to establish vegetative cover, as well as annual rent payments while the practice is being maintained.  The Maryland Agricultural Cost-Share (MACS) Program will provide an additional 37.5% cost-share for a total of 87.5%.  Various other bonus payments may apply.  Anticipated to be effective February 1, 2005, payment for establishing forested riparian buffers includes the soil rental rate plus $200/ac for the first 50 feet and $50/ac for 51-100 feet of buffer: for grass buffers-the soil rental rate plus $150/ac for the first 50 feet and $50/ac for 51-100 feet of buffer; wetland restoration and conservation cover on highly erodible land-the soil rental rate plus $50/ac.  The costs of fencing to exclude livestock and alternative watering sources are also eligible if needed. Landowners have the option of selling a permanent easement to the state of Maryland.

• Conservation Security Program (CSP).  CSP, part of the 2002 Farm Bill, is a voluntary program to assist farmers financially and technically to promote conservation and improvement of soil erosion and water quality concerns on a watershed level.  This program addresses improvements to soil, air, water, energy, plant, and animal life on cropland, grasslands, pasture, and forest land that is an incidental part of an agriculture operation.  There is a three-tiered system depending upon the extent of the practices, with contracts having an annual payment cap, and lasting for 5 to 10 years.  There are two eligible watersheds in Maryland, the Chester-Sassafras Watershed and the Monocacy Watershed.

• Environmental Quality Incentive Program (EQIP) - EQIP was re-authorized in the 2002 Farm Bill to target locally identified priority areas where there are significant natural resource concerns. Typically 50-60% of the funds are targeted to livestock operations with the remainder targeting other conservation priorities.  EQIP offers financial, educational, and technical assistance to install practices.  Fifty percent cost sharing is available for certain forestry conservation practices.

• Landowner Incentive Program

• Partners for Fish and Wildlife - This program offers technical and financial assistance to landowners who are interested in restoring drained or degraded wetlands, riparian forests, grasslands and other important wildlife habitats.  U.S. Fish & Wildlife will assist in locating other funds to “make a project happen”.

• Wetland Reserve Program (WRP). Authorized by the 2002 Farm Bill, WRP is a voluntary program to restore wetlands on private property to: provide habitat for fish and wildlife, to protect and improve water quality, reduce flooding, protect biological diversity, and furnish scientific, recreational, and aesthetic benefits.  WRP allows landowners to sell either permanent or short-term easements to the USDA for wetland areas and to receive cost-share funds to restore altered wetlands to their natural condition.   The landowner continues to control access to the land and may lease lands for undeveloped recreational activities.  Other uses of the land are allowed if they are consistent with protection of the wetland.

• Wildlife Habitat Incentives Program  (WHIP). Authorized by the 2002 Farm Bill WHIP is a voluntary program designed to help landowners improve fish and wildlife habitat on private lands.  Funds are available for developing habitat for upland wildlife, wetland wildlife, endangered species, fisheries, and other wildlife.  In Maryland, priorities are to restore and manage upland grassland habitats and riparian corridors. The USDA provides technical assistance and up to 75% of the cost of installing practices.  Generally, agreements are 5 to 10 years but greater cost share is available for 15 year agreements targeting essential plant and animal habitat.  Cooperating states and private agencies may provide additional expertise and/or funding.

• Woodland Incentive Program (WIP), developed in 1986, provides non-industrial private forest owners with financial assistance (up to 50% of the total cost) for tree planting, timber stand improvement, and other forest management and protection activities.  The goal of WIP is to enhance the environmental, aesthetic, and wildlife benefits provided by private woodlands, while providing the forest resources essential to commerce and industry in the state.
  

 

Marketing Forest Products: Making It Happen!

The harvest of timber is something that most landowners only do once or twice in a lifetime. Whether or not the experience is a positive one will depend upon whether or not you use professional forestry assistance. Below are some common questions and misconceptions of forest landowners:

• Leaving my woodlands alone is the best for wildlife and tree growth! FALSE! Not necessarily!
  Leaving your woodlands alone may not produce optimal wildlife habitat. Most forms of wildlife require varied types and ages of vegetation for food and shelter. In an unmanaged forest, overcrowding often retards tree growth, makes forests more susceptible to disease and insect damage, and reduces the diversity of wildlife habitats. Selective thinning provides more growing space and nutrients for desirable trees, which, in turn, reduces the stress and improves forest health. Other management techniques can be used to create needed wildlife habitat diversity. Why harvest forest products? The planting and harvest of trees is not only a way to receive some income from your property, but is also a major opportunity to improve wildlife habitat, access for recreation, and other forest benefits. However, this requires careful planning and objectives.

• Managing my woodlands takes a lot of money and time! FALSE!
  Improving your woodlands can actually increase your income while maintaining the environmental integrity of the landscape. Careful selection of your firewood or timber can increase the value of your woodland for wildlife, timber resources, recreation and other forest benefits, while providing income. These harvest assets can be used to build roads, improve wildlife habitats, or implement other practices that would not be otherwise affordable. Improving your woodlands does not need to take much of your time either. State foresters and wildlife biologists, as well as private consulting foresters, are available to help you develop and implement a forest stewardship plan. These professionals can assist you in enlisting the services of reputable logging operators to implement the plan. In this way, you can achieve your financial goals and enhance your woodlands.

• Careful management is a good idea, but my woodlands are too small! FALSE!
  Woodland areas of any size can be managed to improve wildlife habitat and tree growth. Through careful management, even small parcels of land can be maintained as scenic areas and also provide favorable conditions for wildlife. In many cases, owners of adjacent property can work together to improve management and reach shared goals.

Why Harvest Forest Products?

• Natural events such as damage by gypsy moth, storm damage, and other factors provide an opportunity to harvest forest products and receive some revenue that would otherwise be lost.

• The thinning of a forest that is crowded will allow the remaining trees to grow faster in diameter.

• Some forest types such Virginia pine are short-lived and will decline if not harvested.

• Harvests can create needed types of wildlife habitat on the property.

• Harvesting can provide income for special life needs such as a child's education, retirement, start of a business or other needs.

Common Timber Sale Terms

• Board Foot - Lumber cut from logs that is 12" x 12" x 1".

• Thousand Board Feet (MBF) - The unit of volume used in timber sales and inventory work.

• DBH - Diameter at breast height which is 4.5 feet off the ground.

• Stump diameter - This is the diameter at about 6 inches from the ground. A stump diameter of 14 inches would be equal to about 12 inches DBH.

• Stumpage Value - Value of the timber uncut "on the stump." Price the landowner receives.

• Highgrading - A poor forestry practice where the best trees are removed and the poorer quality ones are left.

• Diameter limit cutting - A poor forestry practice where all trees above a certain diameter are cut and the smaller ones are left. The rationale is that the smaller trees will make up the new forest, but these trees are usually the same age as the ones that were cut and grow poorly after harvest. Trees to harvest should be selected on their individual characteristics. For more information link to "Just Say NO to Highgrading" which appeared in the Fall, 1998 issue of Branching Out: Maryland's Forest Stewardship Educator.

Common concerns about timber harvesting expressed by landowners

• It is unsightly! This can be minimized by having a sales contract that requires tree tops be cut close to the ground and using firewood or pulp markets to clean up slash left from the harvest of larger trees.

• The forest is damaged forever! Using a licensed consultant forester to administer the sale and market the trees will usually take care of this problem. Avoid harvesting methods such as diameter-limit cutting that cut trees based on diameter rather than their individual attributes.

• The trees left will be damaged! Again, a licensed consultant forester will work with the logging contractor to deal with this problem.

• The roads will be ruined! During the harvest process roads and log landings can be rutted and muddy, but most consultant foresters will require a performance bond from the logging contractor that is returned only after all the road are properly graded and seeded. Forestry Best Management Practices apply as well that all logging contractors must follow.

Forest Harvest Perception

• Many landowners are sold a vision by some buyers where just a few trees are removed.

• Unfortunately, poor harvesting choices result in a forest that loses wildlife and other forest values for generations. The use of diameter-limit cutting where trees over a certain diameter are cut fails to select trees on their individual attributes.

Principles for Marketing Forest Products

• Harvesting should be part of a written forest stewardship plan.

• A successful timber harvest should include three people: the landowner, the professional forester, and the logger..

• Get payment in full before any trees are cut.

• Get all agreements in writing. No handshakes!

Methods of Marketing Forest Products

• Direct Marketing - Selling directly to a logging contractor.

• Indirect Marketing - A consultant forester acts as your agent in the sale. Most landowners lack the knowledge or experience to market their timber, administer the sale, deal with loggers, and handle the many permit issues.

Types of Foresters
Maryland is one of the few states in this region that requires licensing to be considered a Maryland Professional Forester. The forester has a number and stamp. To be licensed the forester must have a 4-year forestry degree, experience, and acquire 8 continuing education credits every two years.

• Public Forester - County-based forester who work for the state. Develop forest stewardship plans but will not handle commercial timber sales.

• Consultant Forester - Independent forester hired by you, who works as your agent representing your interests. Works on commission or fee basis. Offers a broad range of services related to marketing timber, developing forest stewardship plans, and other services. Since this person represents your interests and is paid on commission, it is important that you feel comfortable with their decisions on your behalf. Interview a few consultants or get references from other forest landowners before you make a decision.

• Industrial Forester - Forester who works for a particular mill and represents the interests of that mill.

Benefits of Using A Professional Consultant Forester

• Better Job Environmentally - A contract is used to assure protection of the resources. The forester checks regularly on the harvesting to protect your interests.

• Individual Trees are Marked - Trees in the sale area are marked and tallied by type, size and product. This is the basis of the bid notice sent to potential buyers in the area. You know what will be cut before the harvest and you can better visualize what it will look like.

• More Income - Stumpage is sold on a competitive bid process. Sealed bids are solicited by interested buyers and you and the consultant forester can select the one you want. The offers for the same trees will vary widely depending on the timber markets in the area and the needs of different buyers.

Sale Methods - The method of sale can affect how the forest is harvested. Remember get all agreements in writing, no handshakes! Most timber sale contracts allow the buyer 1-2 years to harvest the timber. There are tax implications depending on the type of sale. The landowner should check with a timber tax accountant or the forester regarding this issue.

• Lump Sum Sale - The logger and owner agree on price for total sale, based on marked timber volume and value. The owner gets money before timber is cut. In many cases, a portion of the agreed upon price is paid at the time of the contract signing, and the remainder at the time of the start of the harvest.

• Sell by Unit - Buyer offers a price per unit - so much per thousand board feet - measured at the landing or mill. This requires a trust that the logger will take all wood to the mill.

• Percentage Basis - Provides seller with 30 - 60% of the profit from sale to the mill. Least desirable.

The Timber Sale Process

• Develop a forest stewardship plan

• From landowner references and personal interviews, select a consultant forester who represents your interests.

• Get a contract or a letter of agreement from the consultant. A written agreement will help avoid misunderstandings and make clear what is expected. Each agreement should fit the landowner's needs and be mutually acceptable. Some of the things to consider in your contract with a consulting forester:

• Location and description of the property
• Description of services to be performed
• Time frame in which services are to be performed
• Form in which the information, advice and reports will be provided
• Ownership of data such as timber inventory, survey notes, computations and analyses
• Responsibility for determining and marking property or project boundaries
• Assurances that the forester (or the company) will meet all legal requirements for the work to be performed and that workmen's compensation, liability protection, and other labor and safety laws are met for persons working on your property
• Contract performance and quality standards, including penalties for failure to meet contract specifications. In the case of timber harvests, include the frequency of inspections or other supervisory duties
• Amount you agree to pay (typically agree to 10-15% commission on gross timber revenues) and the schedule for payment.

• Consultant will mark and tally trees to be harvested.

• Solicit bids from potential buyers.

• Select logger, develop contract, and preferably get money before harvesting takes place. If you are planning to sell timber, you will need a timber sale contract between yourself and the timber buyer. Cornell University provides a sample timber contract you may want to consider. The contract should cover the terms of the harvest, including:

• Location of the timber being sold
• Time period in which cutting can be done and when the contract expires
• Species and volume of timber being sold
• Purchase price and payment procedures
• Utilization requirements such as stump height, log lengths, cutting to a minimum top diameter
• How cut products will be measured if the sale is not based on a lump sum payment
• Damages to be paid for improper cutting or damage to property
• Performance bonds or escrow accounts, if any
• Type or size of equipment to be used and how cut products will be moved out of the woods
• Location of logging roads, skid trails and log landing areas
• Erosion control precautions or site restoration requirements Riparian area or stream crossing concerns
• Weather related limitations
• Disposal of solid waste, trash, waste oil or other debris generated by the logger
• Disposal or reduction of logging slash (limbs and tree tops)
• Compliance with cutting notice laws or other logging ordinances
• Supervision of the sale, including authority to halt logging if contract provisions are being violated
• Liability and Worker's Compensation insurance
• Final inspection to assure contract compliance
• Other issues of concern to the buyer or seller

• Consultant administers sale by working with logger.

• Final site inspection and return of performance deposit

Common Mistakes Made By Landowners!
Harvesting timber too small or waiting too long. By having a forest stewardship plan prior to any harvesting decision, you can know what the opportunities are and the impact of those decisions.

What to Avoid!

• Diameter Limit Cutting! This means trees are cut based on size, not on their ability to grow after harvesting. This type of harvest will usually limit the health and productivity of the next forest.

• Selling Timber with NO Contract! If you have no contract, your interests are not protected.

• Being Paid as the Timber is Cut! Use lump-sum sales where you get all your money up front, and an acceptable contract, before any timber is cut.

• Erosion and Sediment Control Problems! The landowner has final responsibility. Violations can result in stiff fines.

Stumpage Report

Where to get help...
The sale of timber products should include three people: 1) the forest landowner selling the timber; 2) a licensed professional forester to assist the landowner in determining which trees should be harvested and working with the logger; and 3) the logger who carries out the actual harvesting of the trees.

A list of licensed professional foresters is available on the web or by calling your state forester or Maryland Department of Natural Resources Forest Service at 410-260-8531. Those in Delaware can call the Delaware Forest Service at 302-739-4811. University of Maryland Extension also provides educational publications and workshops that can be of great value to forest landowners considering a timber harvest. For more information write or call the Wye Research and Education Center, P.O. Box 169, Queenstown, MD 21658 / 410-827-8056 or Western Maryland Research and Education Center, 18330 Keedysville Road, Keedysville, MD 21756 / 301-432-2767.

Penn State Cooperative Extension also provides a stumpage price report that is available online and would be of value to counties that border Pennsylvania.

Written by:
Jonathan Kays, Regional Extension Specialist-Natural Resources
University of Maryland Extension
Keedysville, MD 21756

Posted 2/20/09: Income Tax Deduction for Timber Casualty Loss provided by USDA Forest Service (pdf)

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Taxes: Reducing Hidden Costs

Taxes are a real, but sometimes hidden cost to anyone who owns forest land. Forest landowners in Maryland can increase the financial return on their forest stewardship efforts by using existing laws and programs to minimize property, income, and estate taxes. The following information highlights some of those laws and programs. Forest landowners are encouraged to investigate these and other tax and estate planning considerations.

Keep Good Records!

The importance of keeping good records on your property cannot be overemphasized. Accurate records are critical to responsible stewardship and to the future of forest land as well as to the proper reporting and documentation of income and expenses for tax purposes. An excellent record keeping and account book entitled the Forest Management Account Book (Extension Bulletin 360) can be purchased from your county extension office.

Property Taxes - these are paid yearly to county government. Forest landowners can receive a lower property tax assessment in one of three way. Through a forest management program, enrolling in an agricultural district, or donating/selling a conservation easement.

Forest Management: To reduce property taxes, a forest landowner must first have a forest stewardship plan for a minimum of five forested acres. The plan can be developed to meet the landowner's objectives by a Maryland licensed forester---a Department of Natural Resources forester, a private consulting forester, or an industrial forester. This plan must meet the basic requirements for the Forest Stewardship program (minimum five forested acres) or the Tree Farm program (in Maryland, a minimum of ten forested acres). The Maryland Department of Assessments and Taxation offers landowners two assessment options: Forest Conservation Management Agreement (FCMA) or the Forest Management Plan (FMP). Both FCMA and FMP reduce property taxes but usually do not affect the fair market value used to assess an estate for taxes.

Forest Conservation Management Agreement (FCMA) - Any owner of five or more contiguous acres is eligible to enter a FCMA with the Maryland Department of Natural Resources. House sites, crop land, and other non-forest open spaces are not eligible, but land recently planted to forest tree seedlings or Christmas trees is eligible one year after planting. The FCMA is based on a forest management plan developed by a Maryland registered forester in consultation with the landowner. Certain forest management activities are outlined to be completed during a minimum period of fifteen years. The plan and associated activities can be adapted with agreement by the forester and it can be extended. It is a legal agreement recorded in land records, binding for fifteen years, and can be renewed. In return, the property is assessed at $100/acre regardless of where it is located in Maryland. The valuation is frozen at that level for the fifteen years of the agreement. If the plan is not followed for the full fifteen years, penalty taxes will be owed for the non-compliant year.

The FCMA involves several fees:

• A management plan development fee of $175-$225, depending on the acreage; this fee is not eligible for cost sharing if the plan is developed by a DNR forester;
• An entry fee that is equal to 0.55 percent of the assessed value, but not less than $50; and
• An inspection fee equal to 20 percent of the entry fee but not less than $100, for an required inspection by a DNR forester every five years.
• Information on FCMA is available from the local DNR forester or the county Extension office.

Forest Management Plan (FMP) differs from an FCMA in that it is not a legal agreement and does not involve an entry fee. As with the FCMA, a Maryland registered forester, in consultation with the landowner, prepares a forest management plan. The plan is submitted by the landowner to the county assessor. Most county tax assessment offices require an inspection every three years by a Maryland registered forester. Many consultant and industrial foresters do not charge an inspection fee for existing clients. Land under FMP is valued at $150/acre. This value is not frozen and could change during the three years of the agreement, but in the past these changes have not been significant.

The FMP has these fees:

• Management plan development fee. Some industrial foresters will develop plans for their clients in exchange for first refusal on the sale of any timber products. Under the currently-unfunded federal Stewardship Incentive Program (SIP), the cost of having the plan developed by a consultant forester qualified for 65 percent cost-sharing.
• Inspection fees, if inspections are required by the county tax assessment office, depend on whether the inspection is done by a DNR, consulting, or industrial forester.

The difference between the tax bills of the FCMA and FMP options can be small. However, the FMP differs from the FCMA in these respects:

• No entry fee;
• No legal attachment in the land records; and
• Shorter time period.

Some county assessment offices may be reluctant to acknowledge the FMP option, but this is a state tax assessment option that counties are bound to honor. For more information, contact the county tax assessment office, DNR forester, or a consultant or industrial forester. A list of registered consultant and industrial foresters is available from the local DNR forester or the local Extension office. Landowners need to assess their situations to determine whether FCMA or FMP is more advantageous. DNR foresters have computer software to analyze a forest landowner's information to determine which agreement would be more beneficial

B. Agricultural district Forest land is eligible for enrollment in an agricultural district, thereby reducing the land assessment and the property taxes. A minimum 100 acres (lesser acreage if adjacent to an existing agricultural district) and a natural resources conservation plan, developed by the Natural Resources Conservation Service in consultation with the landowner/manager, are required. Eligibility is based partly on soil types. Soils that do not meet the requirement for agriculture use may meet the requirement for forestry use and be eligible. Enrollment in an agricultural district is for renewable five or ten-year periods, depending on the county. An agricultural district is an agreement to continue agriculture/forestry operations. It provides some protection against nuisance complaints and is a prerequisite for selling a conservation easement to the Maryland Agricultural Land Preservation Foundation. Contact the county planning department.

C. Conservation easement

Forest land that is eligible for the sale or donation of a conservation easement most likely also will qualify for a reduced assessment. Contact the Maryland Environmental Trust (donation of easement) or the Maryland Agricultural Land Preservation Foundation (sale of easement).

TIMBER TAXES

The sale of forest products can result in increases in tens of thousand of dollars in income in that year. There are a number of strategies to minimize timber taxes. The most common strategies to remember are:

• Keep records of all your forest land-related activities on your property using the Forest Management Account Book (EB360) available from University of Maryland Extension.
• Use the services of a licensed consultant forester to act as your agent in the timber sale. The Extension Bulletin, Marketing Forest Products (EB-367) provides more detail on how to properly market forest products.
• Claim timber sale income as capital gains, not ordinary income which has a higher tax rate and is subject to 15.3% self-employment tax.
• Have a forester calculate the basis value of the timber which can be subtracted from the income received from the sale of forest products.
• Remember to subtract the expenses associated with the sale, such as the commission paid to a consultant forester, equipment, travel, meals, etc.
• Locate an accountant who is familiar with the specialized are of timber taxes.
• Use the National Timber Tax Website.
• Order useful references such as those listed below:
  • Forest Owner's Guide to the Federal Income Tax, Ag Handbook 708, $12, from US Government Printing Office, Superintendent of Documents, 202-512-1800.
  • Timber Sales and the Federal Income Tax: Guidelines for Managing and Reporting by Farmers and Timber Growers, Extension Circular 406, 1996; one free copy available from Publications Distribution Center, Penn State University, 112 Agriculture Administration Building, University Park, PA 16802; 814-865-6713.
  • Timber Tax Management for Tree Farmers, annually updated, American Forest Foundation, $24.95; 202-463-2455 or 1-888-889-4466.

Estate Planning

Federal estate taxes are paid by the heirs when the owner of an estate dies. Unfortunately, planning ones estate requires accepting one's own mortality and communicating with the heirs about the future of the property. Estate planning for woodlands can be very challenging since the planning horizon for most forests typically exceeds a lifetime. Many forest landowners invest much time and effort into the management of their forest during their lifetime, but fail to plan for what will happen to the property beyond their tenure.

Forest land has appreciated at a rate that far exceeds inflation in many parts of the country and a family that always thought of themselves as poor may discover they have an enormous equity in forest land. Many forest landowners make the mistake of assuming the assessed value of the property for property tax assessment (which is based on current-use for forestry or agriculture) is the same as its assessed value for estate taxes. When the remaining spouse of property dies, the value of the estate is based on its full value, which includes it value for development. While the property may have been purchased many years ago for a low price, the estate tax is now based on current value for development, which may be many times the original cost. This is a common problem in the rapidly developing landscape of Maryland.

Resource: Estate Planning for Forest Landowners: What Will Become of Your Timberland?  2009.  United States Department of Agriculture Forest Service. 180 Pages. Available online (pdf) and in hard copy. Ordering instructions included on the page linked above and can be found under "Publication Notes."

Take Advantage of the Unified Tax Credit for Each Spouse. Estate taxes are a problem because they are very high compared to income taxes. In the past, the first $600,000 of the estate for each spouse was excluded from taxes, which is known as the unified tax credit. However, after the first $600,000, the tax starts at 35 percent and rises to a maximum of 55 percent. The unified credit can be taken by each spouse, so that with good estate planning, two spouses could exclude a total of $1.2 million from the estate. If the first spouse dies and does not use the unified credit then the remaining spouse inherits all of the estate with no taxes. However, when the remaining spouse dies, only $600,000 can be excluded from the estate, not the $1.2 million. A major opportunity is lost if spouses do not take advantage of the unified credit. Hence, the need for good estate planning while both spouses are still alive.

In situations where the estate owner(s) did not have an adequate estate plan, heirs may be left with an large estate tax obligation that they are not prepared to pay. Heirs are sometimes forced to hold a quick sale of property or the timber in order to pay the tax and to satisfy the urgency of the IRS. Many years of careful forest stewardship by the original owners can be lost.

Steps in Estate Planning

The first step in estate planning is to learn more about the subject. Estate planning is usually done in anticipation of dispensing property to others, with three things in mind: 1) to continue a forest-management legacy and to keep the land intact and in the family; 2) to minimize the cost of transferring ownership when the estate is dispersed; and 3) to provide for dependants and heirs.

Perhaps the most difficult part of this process is to talk with the heirs and make decision such as who will be the executor of the estate and what are their plans for the future. Are the heirs really interested in holding on to the property and continuing the activities of their parents? Good communication among the owners and the heirs is essential. The estate planning team should include your consulting forester, an estate planning attorney, an insurance underwriter, your personal representative or executor, and possibly, one of your children. An accountant may also be part of the team, if necessary.

It is likely that your local attorney you have worked with for years may not be qualified to handle your estate planning needs. Finding a qualified estate planning attorney is critical. There are a number of estate planning tools to help you accomplish your objectives. They include trusts, insurance, corporations, conservation easements exchanges, and other tools. A good source to help locate a qualified estate planner is the American College of Trust and Estate Counsel (3415 S. Sepulveda Boulevard, Suite 330, Los Angelos, CA 90034, 310-398-1888). The college requires members to have a minimum of ten years of experience in estate planning and sound local and national references. Not every estate planner is a member of the college.

The 1997 Taxpayer Relief Act. The 1997 Act provided some very positive changes that will benefit forest landowners. These include increases in the unified tax credit from the $600,000, inflation indexing of annual gifts, use of installment payments of estate taxes, and the ability to donate a conservation easement after the owner has died under certain conditions. There are other changes as well that you should investigate. The next section provides some information on these changes. Use the references at the rear of this chapter to educate yourself about estate planning. Contact your local Cooperative Extension office or state extension forester for educational information. Remember! If you don't plan your estate, the government will!

Year	Unified Tax Credit - Cash Equivalent
1998	$625,000
1999	$650,000
2000-2001	$675,000
2002-2003	$700,000
2004	$850,000
2005	$950,000
2006	$1,000,000
After 2006	tied to inflation

Excluding Part of the Estate After Death with a Conservation Easement

Conservation easements allow the landowner to give up the right to develop the property in perpetuity. Selling or donating an owner's development rights reduces the fair market value of the land, which reduces the associated estate taxes. In the past, this had to be done before the owner died and the property was passed on to the heirs. Therefore, it did not provide a method for heirs to reduce a large estate tax burden after death.

The 1997 Taxpayer Relief Act allows an executor of an estate to exclude up to 40 percent of the value of the land in a qualified conservation easement. To qualify, the land must be located within a 25-mile radius of a metropolitan area, national park, or wilderness area or within 10 miles of an urban national forest. This major change, subject to some restrictions, allows heirs with a large estate tax to put the land into an easement, eliminate future land development, and significantly reduce the land value and estate tax. Almost the entire state of Maryland qualifies for this special exclusion. This is due largely to the Baltimore-Washington metropolitan area, the lengthy C&O Canal that runs the length of the Potomac River, and the Catoctin National Park north of Frederick. This provided an excellent opportunity for Maryland forest owners who have seen the value of their forest properties increase rapidly with development pressures.

Contact the Maryland Environmental Trust concerning a donation of a conservation easement and the Maryland Agricultural Land Preservation Foundation concerning a sale. Sources of other information:

• Forest Stewardship Education Publication Resources on this website about estate planning, conservation easements, and other related topics.
• Legal Aspects of Owning and managing woodland,, 1998. Thom J. McEvoy. Island Press. $20. (www.islandpress.com/) or call 202-232-7933
• Preserving Family Lands, Book 1" and Preserving Family Lands, Book II: More Planning Strategies for the Future, 1997 & 1998. Stephen J. Small. Landowner Planning Center, Boston, MA. Can be ordered from traditional bookstores or internet bookstores.

Developing a Working Forest Conservation Easement - This estate planning tool allows forest landowners to ensure that their forest stewardship efforts extend beyond their tenure. Provides an overview for private forest landowners.

You can participate in one of our programs that are held at locations across the state:

	The Woods in Your Backyard Workshop is appropriate for land owners of 10 acres or less (the majority of land owners!) Small lots, such as the one you may own, are a big deal.  This land, wooded or not, is a vital source for all. By enhancing or creating natural areas and woodland on your lot, you can enjoy recreation, aesthetics, wildlife and water quality.
	The Maryland Woodland Stewards Program is appropriate for land owners of 10 acres or more. The Maryland Woodland Stewards Project (formerly the Coverts Project) is an educational program of University of Maryland Extension and the National Wild Turkey Federation.  It teaches sound forest and wildlife management practices to a select group of people each year.  In return, participants apply these principles to their own property and actively encourage others to practice good forest stewardship. Since 1990, 365 people owning over 68,000 acres have been trained through this program.
	General Forestry Course: This course is designed for individuals wishing to increase their understanding of forests and forest management. Specifically, the course targets Maryland forest landowners and other citizens with an interest in the principles and practices of forestry.
	GPS Training Workshops: Handheld GPS receivers are a great resource for landowners, natural resource professionals, and other outdoor recreationalists. Current GPS units are accurate (plus or minus 15 feet) and can be used for marking hunting locations, structures, streams, your vehicle location, as well as for fun activities such as geocaching. Professional natural resource managers can save valuable field time by using GPS with a computer to locate inventory plots, access roads, outlining timber sale and property boundaries, directing customers to sale locations, and much more. Beginner and advanced workshops are available.
	Master Logger Program: The Maryland Master Logger program is a series of comprehensive training courses designed for the logging professional.
	Delmarva Forestry Seminar This seminar is held each January and the location alternates between the Maryland Eastern Shore and Delaware. The 2009 seminar location will be in Delaware. The seminar is presented by the University of Maryland Extension in cooperation with Delaware Cooperative Extension as well as other forestry agencies and organizations. This regional seminar is targeted to forest landowners and provides concurrent workshops on a range of forest and wildlife topics. Pre-registration required. For more information or to register, contact Nevin Dawson with the University of Maryland Extension (ndawson@umd.edu) 410-827-8056 ext. 125, or Dot Abbott with Delaware Cooperative Extension (dotad@udel.ed) 302-730-4000, ext. 112.
	The brochure, Working to Sustain and Enhance Maryland's Natural Resources, provides descriptions and contacts for many programs.