Estate planning when mineral rights are involved

Estate planning when mineral rights are involved

Life is hard, and then the government steps in and makes it even harder. When you lose a loved one, grief counselors, clergy, even funeral directors are there to guide and support you through the difficult time. Uncle Sam saddles you with property taxes.

Careful estate planning can help ease tax and paperwork burdens. Some people choose to use a concept called a “lifetime estate.” In this case, the owner of a property can transfer that property to another person and then continue to use the owners’ rights until his or her death. At that point, ownership automatically reverts to the person who owns the deed. The “life tenant” or original owner enjoys all the rights of an owner, including such mineral rights, until death. The only right he or she loses is the right to sell the property.

Life estates are sometimes used to ensure that the intended heir receives the property, to avoid probate, or to ensure that the ancestral home remains in the family (passing property to children but allowing a surviving spouse to live there ). Like any tortious action, it can be difficult to understand and get right without the advice of a good attorney.

However, if you are the lucky recipient of a life estate deed, you have additional options for help. Perhaps you inherited a family property with leased mineral rights. This means that an oil or gas company shares a percentage of the royalties from any production from the ground. The former owner of the property (perhaps your rich, now beloved uncle) enjoyed the rewards of these rights during his lifetime. Now you would like to do it too.

Many royalty companies buy interests in minerals, but not the land itself. The process involves simplifying all the paperwork for your life estate so that you can enjoy the benefits as soon as possible and reduce taxes as much as possible. A royalty company then converts the royalty interest into cash quickly and efficiently, giving you time to mourn your dearly departed uncle without worrying so much about Uncle Sam.

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