My wife and I have been married for 35 years and I have (mostly) happily handled her mineral rights and taxes and such.
She is about to inherit another 10 properties from her mother, so 20 total max. Some produce and some do not. About $30k annually.
While I have enjoyed learning about the counties in Oklahoma and how this all works, our adult kids have other things to do with their time. And some of them have kids, and…
So, what is the best structure for a 60-year-old woman to use to manage these assets and then hand them to her children when she and her husband (me) die?
We have a family trust that is set up to protect her assets so they go to the kids if she dies first. So, we could use Family Trust, FBO . But is this best?
Irrevocable trust, LLC?
What do we need?
Easy to track all the assets and deeds - I have spent the past 6 years tracking down my mother-in-law’s interests. I find this fun, it makes her children crazy.
One account to receive payments.
One set of taxes with optimal taxation.
Protected from debtors, I guess. Seems smart.
Easy to divide by 3 when we’re both gone. Or, maybe the kids keep it whole and divide the shares?
I can manage all of this now. We are each 60. In 20 years I want it to be easy for the kids to understand and manage.
Then, we want a clean break for the kids into three after the second death.
As much as we don’t want further dilution, we really don’t want any issues among the kids once we are dead about how to manage joint assets. Each gets one-third, and you do you.
Mine were registered in the name of my Trust and considered an asset of the Trust - just like stocks, bonds, and real estate.
Or, she can just put them in her will with beneficiaries as she desires.
We are going through this same thing right now. Be very careful of my advice, as all family things can be different. I have managed my own, my sisters’, and my cousins’ minerals for 40 years. A lot of mineral acres. Leased, pooled, 1099s, etc. None of the next children, including ours who are 40 years old, have ever wanted to learn the business.
We have a fantastic law firm in El Reno, Oklahoma (just west of Oklahoma City) who has always done our considerable legal work including putting the acres into a revocable trust and being the exchange for lease payments. After exhaustive research, we are placing all the 36 wells and the mineral acres with a mineral management company called Argent Mineral Management. This is a huge company that has maybe 50 offices managing royalty owners’ minerals. It is NOT a drilling, leasing, or landsman company.
Our attorney’s office is recommending based on past client reports. All other research including BBB, Google Reviews, etc., is very positive. The minerals are in the various revocable trusts but we will COMBINE them back into one LLC so that Argent has only one lease with production companies and when leasing, there are many mineral acres, which brings premiums at leasing. They will produce a year-end report but NOT produce a K-1. It is easy to distribute the LLC income by the amount of mineral acres owned by each director.
There is a lot of information in this e-mail, and working with a trusted attorney in the state where the mineral acres are located is advisable. So our thinking is to get all those fractional mineral acre shares recombined and get them into professional management. An ending note, we have had extremely poor luck with bank trusts departments. They just do not understand the nature of mineral acre management.
Thank you for this detailed reply. As you guessed, since some these assets were distributed to family members and now inherited, we have the option to combine some of them and simplify.
Your note says there is an LLC but no K-1. What do they send instead of the K-1?
Thanks.
I swear that this forum is the only place in the world where people just help each other via their own expertise and insight without a lot of baggage. Thanks!
A multi-owner LLC will need to file a federal tax return. If it has elected to be treated as a partnership, then it will file a Form 1065 with K-1’s. Presumably their tax accountant is taking care of this, likely based on the tax data provided by the management company.