Forestry

Mikeyshragh

I recently got left a forestry in a Will. It's 20 years sense it was set. I'm wondering what's the next step. How can I sell it or how much is it worth. I'd be greatful for any help. Do I ring someone?

Oldtree

You could have a look at these previous threads that may help:

http://www.boards.ie/vbulletin/showthread.php?p=90371540#post90371540
http://www.boards.ie/vbulletin/showthread.php?t=2057061547

Before selling it on, it may be a good idea to know what you are selling and alternative avenues open to you, like would it be worth holding on to as an investment for yourself. Also issues like inheritance tax would become due should you sell it, could be pertinent.

My first port of call would be Teagasc

http://www.teagasc.ie/forestry/

and/or contact a forest management company for advice

These are 2 of many you could contact.

http://www.greenbelt.ie/
http://www.fel.ie/

TomOnBoard

I agree with all of Oldtree's comments.

However, I would amend the comment that "Also issues like inheritance tax would become due should you sell it" to reflect the fact that inheritance tax issues arise immediately upon inheritance (generally by way of professional valuation of the value of the inheritance at the date of such inheritance), and must be dealt with by the executor and his/her solicitor whether a sale is likely to occur or not. It should also be noted that, depending upon the manner in which the disponer treated the plantation for tax purposes, inheritance tax may arise upon the underlying land, but NOT on the trees growing upon it- generally such trees have been seen as tax exempt, whilst the underlying land is not.

And in that little gem, there lies a considerable conundrum for all involved, as follows:

If one takes say 10 hectare of reasonable land (valued at say €40,000) and then it is planted with Sitkas, after 5 years it is arguable that the land is actually worth much less that it was before it was planted. In this example, it might be worth say €15,000 in terms of land alone. Why? Well, to turn a perfectly valuable 40k plot of agric or semi agric land into forest, and then try to take that back out of forestry 5 years later might cost 25k in terms of remediation works, and thats not to even mention grant and premium returns etc.

A VERY THORNY AREA INDEED!!!

Oldtree

:eek: I was only thinking of it in simple terms - if the lands were sold for more than the inheritance valuation, that tax could be due on the difference (if inheritance thresholds had already been reached). But I suppose that will depend on the size and then value put on the forest.

hoogle

You could also look into joining a forestry coop if you intend to keep it and manage it. They should give you all the advice and help you need

Oldtree

Forgot to mention that on this Teagasc webpage is the contact list for your local Forestry Adviser, and the advice would be independent

see : Or ask your local Forestry Adviser: here on the mid right and select your county for a name and phone number.

http://www.teagasc.ie/forestry/advice/index.asp

Jack180570

TomOnBoard wrote: »

I agree with all of Oldtree's comments.

However, I would amend the comment that "Also issues like inheritance tax would become due should you sell it" to reflect the fact that inheritance tax issues arise immediately upon inheritance (generally by way of professional valuation of the value of the inheritance at the date of such inheritance), and must be dealt with by the executor and his/her solicitor whether a sale is likely to occur or not. It should also be noted that, depending upon the manner in which the disponer treated the plantation for tax purposes, inheritance tax may arise upon the underlying land, but NOT on the trees growing upon it- generally such trees have been seen as tax exempt, whilst the underlying land is not.

And in that little gem, there lies a considerable conundrum for all involved, as follows:

If one takes say 10 hectare of reasonable land (valued at say €40,000) and then it is planted with Sitkas, after 5 years it is arguable that the land is actually worth much less that it was before it was planted. In this example, it might be worth say €15,000 in terms of land alone. Why? Well, to turn a perfectly valuable 40k plot of agric or semi agric land into forest, and then try to take that back out of forestry 5 years later might cost 25k in terms of remediation works, and thats not to even mention grant and premium returns etc.

A VERY THORNY AREA INDEED!!!

Hi Tom, 10ha of forestry type land would be valued at between 3500 and 4000 per acre so that would amount to 100k rather than 40k based on current prices...
Also it would make zero sense to plant land that has an agricultural value of 15k acre.
Regarding long term valuations on planted land and returns... under the new scheme which will be announced shortly, there will be an annual premium (income tax free) of around €200/ac payable for 15 years.
In addition if the land was submitted for single farm payment in 2008 and the person that submitted it was paid SFP, then single farm payment can also be paid to the landowner (subject to satisfying the terms of the SFP scheme), in addition to the forestry premium. The average SFP is in the region of €100/ac so that would bring the annual income from planted land to €300/ac.
Regarding the timber value... at clearfell based on todays timber prices a good acre of well managed Spruce would make around €10,000/ac.

TomOnBoard

Jack180570 wrote: »

Hi Tom, 10ha of forestry type land would be valued at between 3500 and 4000 per acre so that would amount to 100k rather than 40k based on current prices...
Also it would make zero sense to plant land that has an agricultural value of 15k acre.
Regarding long term valuations on planted land and returns... under the new scheme which will be announced shortly, there will be an annual premium (income tax free) of around €200/ac payable for 15 years.
In addition if the land was submitted for single farm payment in 2008 and the person that submitted it was paid SFP, then single farm payment can also be paid to the landowner (subject to satisfying the terms of the SFP scheme), in addition to the forestry premium. The average SFP is in the region of €100/ac so that would bring the annual income from planted land to €300/ac.
Regarding the timber value... at clearfell based on todays timber prices a good acre of well managed Spruce would make around €10,000/ac.

Mmmmmm!

I think you might have missed out reading a few words of my original post, such as...

1. If... say...
2. In this example...
3. it might be worth
4. etc...

Its called an example because it doesn't pretend to be a real- life situation, but it does try to highlight a point based on the example given..

As to the 15,000 an acre for agricultural land... 'twas never mentioned... What was said was that the original (EXAMPLE) 40 grand value of the 10 Ha might be worth only 15k (for the 10 Ha) as the fact that the planting had been done would need a significant investment to undo....

As to the SFP, the OP's question referred to Inheritance.... The question of obtaining an income simply does not arise...

Finally, the timber value of €10,000/ac is irrelevant. The example related to a valuation at 5 years, and not at 35 or 50 or whatever.

I hope this clarifies...

Jack180570

TomOnBoard wrote: »

Mmmmmm!

I think you might have missed out reading a few words of my original post, such as...

1. If... say...
2. In this example...
3. it might be worth
4. etc...

Its called an example because it doesn't pretend to be a real- life situation, but it does try to highlight a point based on the example given..

As to the 15,000 an acre for agricultural land... 'twas never mentioned... What was said was that the original (EXAMPLE) 40 grand value of the 10 Ha might be worth only 15k (for the 10 Ha) as the fact that the planting had been done would need a significant investment to undo....

As to the SFP, the OP's question referred to Inheritance.... The question of obtaining an income simply does not arise...

Finally, the timber value of €10,000/ac is irrelevant. The example related to a valuation at 5 years, and not at 35 or 50 or whatever.

I hope this clarifies...

Hi Tom,

Thank you for your reply and your explanation of what an example is, the explanation with which I agree. However, an example is generally given to highlight or further explain an issue and therefore should be relevant and serve the purpose of illustrating the point that the writer is trying to highlight. I do not believe that the example you put forward fairly illustrates the point I think you were trying to make.

I take your point that you did not say that the land was worth €15k per acre rather that the entire parcel of 10ha 'might be worth say €15k in terms of land alone'... Im not sure why you are trying to outline this type of a scenario whereby someone plants 10ha and then 5 yrs later decides to take the land out of forestry. Yes it can happen, but it rarely does and anyone who plants land under the forestry schemes is clearly told that the land must remain in forestry forever and it follows therefore that a landowner would not intentionally plant his/her land and then 5years later decide to remove the trees and turn it back into agricultural land. On this basis I do not believe that your point is fair.

Also, the OP did not ask for a valuation at year 5 or what would be the effect on the capital value of the land if he/she were to plant it... the OP simply said that he/she recently inherited a 20yr old forestry and was wondering what the next step was and whether he/she could sell it and if so what was it worth.... therefore to be fair, my contribution regarding the valuation of a mature forest is far more relevant to the OP than your example of removing a 5yr old forest as the forestry is now 20 yrs old and clearly 15 years too late for your scenario of removing the trees. I hope this clarifies.

To directly address the OP's question...
Next steps -
1. Contact local Teagasc Forester/independent Forester/Forestry Company and ask them to view the forestry to get their opinion as to what it is worth and whether it is too late to thin the forest.
2. Decide for him/herself what she wants to do with the forestry - options are to sell it in its entirety or to keep ownership of it and manage it to clearfell.

TomOnBoard

The O.P. asked specifically what was the "next step".

My point and the subsequent example related solely to the matter of valuation of the land for Inheritance Tax purposes. My point with respect to the value of the land itself rather than the trees thereon is entirely relevant, as tax would be payable on the value of the land, but not on the value of the trees (depending upon how the original owner had set up his/her forestry operation on the site. The Inheritance tax, if any, would be payable as soon as the O.P. would become the legal owner.

Accordingly, the "next step" would clearly be resolving the Inheritance Tax question, in which case my example would hopefully have highlighted the need for the O.P. to look carefully at valuations and take everything into account.