Landowner Liabilities

insurance liability naturaal disasters property taxes Aug 08, 2022

Owning forestland is one of the most rewarding assets you can invest in. Perhaps not in traditional ROI measurements, but when you consider all the “intangible” characteristics- being a landowner far exceeds any other investment out there. 


But like any asset you have, you will want to be sure you understand your potential risk and what steps you can take to protect yourself. 


When you learn to drive, you take some sort of defensive driving course to understand signs and rules of the road… but more importantly how to maneuver around other people on the road. And in instances of accidents, having insurance to cover you financially. 


When you own a home, you may consider a security system or camera to watch for unethical strangers trying to break in or cause harm; as well as a home insurance policy to protect you from various natural events like wind damage or flooding. 


When you invest in retirement funds you may be looking at Roth opportunities to maximize your long-term finances and diversifying into a variety of different accounts to protect you from extreme volatility of the economy or markets.  


Different assets have different risks and needs to set yourself up the best way possible, and again, your land is no exception.


So, what are some risks associated with land to be aware of? 

  • Trespassing 
  • Property taxes 
  • Natural disasters 


1. Trespassing

When it comes to ANY amount of land, long distant or on-site, trespassing is always a concern. We cannot control who may enter our property boundaries (unless we put a 12’+ perimeter fence, which isn’t realistic) or the motives of those people. But we can make it more difficult for them, and at the very least make it EVIDENT they are trespassing.

This can be done through painted boundaries! In many Southeastern states there is the “purple paint law” which states that purple painted boundary lines mean “NO TRESPASSING” legally like red lights means for traffic to “stop”. 

If you’re in a state with this law in affect, you can consider the purple paint in replacement of “no trespassing signs”. If you are not, I highly recommend STILL painting your boundaries with a bright and obvious paint PLUS “no trespassing” signs. 


This removes the liability if someone gets hurt on your land, who wasn’t supposed to be there (think twisted ankle, injury from falling timber, etc), you have obviously informed them they were not permitted to be present on YOUR LAND and reduce the likelihood of being sued. 


In conjunction with painted boundaries, having a gate (of some sort) to reduce access to your land through forest roads. Reducing easy access to your ENTIRE tract of land is a great way to discourage trespassers from dumping, hunting or using your land for any other reasons. “But it’s a pain to have to get out to unlock it every time I want to visit my land” ... maybe, but that's a small price to pay for protection from potential lawsuit that you could be susceptible to without it. 


2.  Property taxes 

Property taxes aren’t necessarily a risk… as you KNOW they’re due annually… it’s not a surprise! Yet, property taxes are often the biggest burden inheritors will express for their struggle to be able to KEEP the land; especially in areas near metropolitan cities or “up and coming” outskirts. Taxes are due annually, whereas income may not be. If you’re not already, looking into your states/county’s conservation use assessment covenants. These are 10-year covenants with the county to reduce your property taxes from market value and recognize their benefit as forest or ag lands. Each state has slightly different eligibility requirements, but this CAN reduce your tax obligations by UP TO 60% depending on your location and current market/development valuation. 


3.  Natural disasters

There’s a lot that can occur out in the woods that is COMPLETELY out of your control: ice storms, hurricanes, tornados, wildfire, insect/disease, etc. And although these events cannot be prevented, but there are a few steps you can take to mitigate impacts (potentially, as there’s nothing you can do to mitigate a tornado) and protect your investment. 


The first: control what you CAN control. This includes diversifying age classes and species (if you have the acreage to do so). Having your timber in different age classes and species can reduce insect and disease susceptibility risk. This can also help reduce SOME risk to wildfire, wind and ice since different age structures will be more or less susceptible to these events too. For example, a mature pine plantation which has been regularly burned will hold up to an average wildfire better than a 4-year-old stand; and the flip side a 4-year-old stand may be more likely to withstand an ice or windstorm due to the more natural “bendability” of a young tree vs mature. 


Of course, if you have small acreage, it’s more so an all-or-nothing game for you due to scale of operations.  If you have less than 50 acres and don’t already have a stream/creek or other natural diversification present, intentionally splitting up your land to different pine age classes just isn’t realistic. 


Which is where the second comes in: insurance considerations. Much of our life is covered under insurance to protect us financially from the “what if” factors (home insurance, car insurance, health insurance, life insurance, jewelry insurance, plane ticket insurance, etc.) I am not an insurance salesman, nor will I pretend to have a great deal of expertise in the matter; therefore I cannot provide you stats on likelihood of needing it, cost of it and ROI impact, etc. but I have seen enough folks who have a large percentage of their retirement plan invested primarily into their timberland to be hit by Hurricane Michael (or equivalent) and see their 30 years of retirement investment wiped away in a days' time. 


“So, I SHOULDNT invest in timberland?” 


That’s not what I’m saying either. I’m saying do so while being informed and prepared to the best of your ability. There are a multitude of insurance companies that specifically cover timberland/forestland and it may be something to investigate further if: you are relying heavily on your future timber sale(s) for your retirement income; have low diversity (small or large acreage); just simply want a little something to help cover the uncontrollable. 


To steal a quote from Spider-Man, “with great power comes great responsibility” and slightly adapt it, I would say that “with landownership comes amazing opportunities and great responsibility.” 


Not many people in this world get the unique opportunity to managed God’s gifts to us: our forests. So not only must we make sure we our good stewards of these lands and manage appropriately, but we must also protect these amazing assets to allow our future generations the same privileges. 


What steps are you taking to reduce your liabilities with your land? 



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