Money trees?

Sell the whole lot, buy a smaller place and live life to the full. Buy a small apartment also, and rent it out for extra income – live for the day!”

That was one of the replies we got recently from the article on Angela, who is 75 years old and lives alone. To recap, Angela has no children and her husband died 20 years ago. On his death, the 40 acres of land passed into her name. She initially farmed it, but more recently leased it out. She told me she was approached by a forestry company to see if she was interested in planting it, saying she could certainly use the extra money.

“I’m on the state pension of €235 a week, but I can’t live on that anymore. There are always bills left to pay,” said Angela

Angela has got the relevant information from the forestry company. However, she realised it would be a 30-year decision and she might not be around to see the trees cut down. It got her thinking about whether she should just sell the land instead.

The three options I outlined were:

1 Plant 30 acres of land and get €5,300 tax free for 15 years.

2 Continue to lease out the land.

3 Sell the land either as forestry or to a local farmer if she could get more.

Other readers took a different view of things and offered some interesting advice:

Long-term lease

Dear Money Mentor,

The best financial approach for Angela might possibly be to long-term lease the land – 40 acres at a minimum of €100 per acre would be €4,000 tax-free. I am presuming she would be under the various tax/USC thresholds, so should get the total into her hand. She only needs to lease for five years if she is concerned about long-term relinquishing, but for security, could lease for a longer term.

As you pointed out, forestry is no better income – and in practical terms, if she gives it over to a forestry company to develop she will get very little for herself and end up with a lot of grief (road building, two thinnings, etc, before getting any real income).

Hopefully this pushes the conversation a little bit further on.

David

expert advice

Dear Money Mentor,

My uncle and I recently investigated the likely cost and grants available to plant a 10- to 15-acre parcel of the farm. We spoke with a number of people, including our local forester, a forestry company and directly with the relevant section of the Department of Agriculture to understand what is required to obtain a grant to carry out this work.

We thought that some of what follows in this message might help Angela make a more informed decision regarding the cost of planting.

Our initial understanding was that the cost of planting and of fencing the land was covered, in full, by the forestry grant and that, once planted, the annual premium would commence and last 15 years.

However, on further investigation the following items were uncovered:

1 The grant application must be submitted to the Department by a suitably qualified forester or forestry company. In our case, a forester visited the site and recommended the appropriate mix of planting for the type of land – a service that cost €340 (I believe this is called “technical approval”).

We also understand that there is a cost associated with the preparation and submission of the grant application to the Department, as this task must be undertaken by a qualified forester or forestry company. We understand that the completion of this task can cost a multiple of the fee paid for technical approval, a second up-front cost to be borne by the farmer (acceptance of the grant at this point results in “financial approval”. We didn’t progress with our application.

Perhaps these costs can be reclaimed with the planting grant, but the issue we wish to highlight is that there are up-front payments that must be made by the farmer.

Are these costs fully reclaimable on the grant application? If not, what proportion of the costs or maximum grant is available?

2 The second item we wish to highlight is that the grant to plant is capped at a certain amount, depending on the type of land to be planted, the mix of trees to be planted and the area to be planted.

In addition, a separate grant amount is available to fence the plantation, but this grant is also limited to a maximum value per hectare. In our case, the maximum grant available would not have covered the full cost of planting and fencing the area.

The maximum amount of annual premium available to the farmer is also determined by the mix of trees, the category of land and the total area of land planted.

However, we understand that the first annual premium isn’t paid until year three or four post planting, as it is triggered after the qualifying forester or forestry company makes another visit to the site to certify that the plantation is established – another cost to be borne by the farmer.

3 A grant is available for road construction, but this is only available for thinning and final harvesting of the plantation. Any cost involved in gaining access to the site for planting (mounding) must be borne by the farmer.

I’m sure you’ve highlighted these items to Angela but, if not, please feel free to do so. Alternatively, if our understanding of the costs/grants available for planting are incorrect, we would appreciate any feedback.

Denis

Follow-up

We will find out about the cost of forestry and follow up with Angela in time on what decision she makes. CL



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