We are considering establishing a mineral rights family trust to cover our mineral rights on 4,620 acres in Carter County, MT. There are 12 family members who own a portion of the rights. One family member who will eventually will inherent rights presently owns the surface rights, and believes that is reason enough that he should be the trustee. Others argue that this could be a conflict of interest. Any comments or recommendations? Does anyone have an
idea of what this might cost? THANKS - this is a great forum, and I really appreciate the
I think my advice would have to be...don't. Someone will be unhappy no matter what path is chosen. You aren't even bound together yet and you are already arguing over who the trustee should be. I am sure there nust be a group somwhere where everyone is happy with their family trust, but I have never run across it in a couple of years of looking, I have on the other hand heard of a few cases where the best that can be said is that it makes family reunions and barbeques real interesting. I wish you much luck whatever you decide.
It's all in the content of the trust instructions. I am a trustee for my (late parents') family trust and am legally and ethically bounded by the instructions contained in the trust. My siblings, in-laws, and I are as dysfunctional as any other family, but we make it work. The trust holds 50% interest in a gas well and owns land in the Utica Shale play, among other assets. Accordingly, I ensure bills are paid and distributions are made in accordance with the trust instructions. If it weren't for the family trust, we would have all been at each other's throat. Accordingly, my wife and I have establised our own family trust. Main thing: consult a good attorney to set up the trust.
HI, my mother recently passed away and us kids decided to put all the mineral rights in a LLC. This way majority rules. We thought about a trust but our attorney advised against a trust. So, we were thinking about just splitting the minerals, 20% to each kid on all properties, but we thought that would be a nightmare going into the future to track down future owners as we pass away. The advantage of the LLC, is we all have a vote and majority will rule. I said we need to project the rights of the majority and not let some future environmentalist family member say no, and refuse to lease. The LLC lives on past our deaths so our children will not have to worry about this again. When one of passes on, their 20% share will get split between their kids and they will act as voting block for the original 20% share. Another advantage is the LLC can decide to send out the revenues as they come in or make other investments. That could cause a war within the family as some will just want their cash, but the LLC gives us the flexibility. A well thought out operating agreement is must. Oh, the shares can be bought and sold in the future too.
I would expect it to cost about $3-4K to set up such a trust with a good attorney--ours was just shy of $4K with one of the best in the nation. Additionally, you might want to consider talking to a bank trust department. I use one to handle all of the disbursements to family members, taxes, etc. It's well worth the minimal costs involved. These institutions often serve as a trustee, which eliminates the need and removes the "issues" of a family member serving as trustee. Good luck.
Timothy Seaman said:
It's good to hear a positive side, as I think our family can work through this. We're still in the early stages
of evaluation, and I think we have a good lawyer to help. Can you provide any idea about potential cost
for setting up a trust? Thanks again for your response.
We are contemplating setting up a "C" Corporation for our mineral estate.
Trusts and LLC's are pass through entities which means the profits are distributed directly to the shareholders and taxed at a personal tax rate.
A "C" Corporation can write off more revenue than a LLC or trust which substantially lowers your tax base. For instance, any corporate NET income below $50,000 is taxed at 15% which is considerably less than most of your personal tax rates. Tip: To avoid the double taxation rule for "C" Corporations, do not declare dividends on your shares. Texas has an annual franchise tax fee of around $350.00. This franchise fee must be paid whether you make money or not so this is annual overhead you must pay when incorporating. Trust managers can run about a thousand dollars a year in fees alone.
Trusts, LLC's, "C" Corporations will have some variation of what amounts to your "Articles of Incorporation". A well crafted set of Articles of Incorporation can eliminate headaches and family squabbles however; we are in our infancy trying to craft something which will bear the test of time and cover as many contingencies as possible.
I have been searching for posts which show options to lower the taxes associated with mineral royalties and avenues for management but it is thin reading so far. Excellent topic !!!