Estate Planing Question on Conveying Minerals

I have mineral intrests in several states and havent spoken to Attorney regarding estate planing. I have a revocable trust that conveys all assets to my wife. My question before I shell out the money to set up my estate. Should I transfer my minerals into my childrens name with a trustee to avoid estate taxes as long as we are both alive?

By the way I'm over 37 years older than my children. So maybe a GST would be an option?

Dear Mr. McCann,

You might want to see a CPA and find out if a Family Mineral Trust would benefit you in your particular case. Done properly, taxation on mineral rights will be extended 21 years from death of the inheriting spouse, if the marital deduction has not been achieved.

Also, if it is established inter vivos, the trust can be established so that the taxable portion off income from production can be spread among several beneficiaries through a discretionary trust. Not only do you preserve the mother of all tax benefits, the depletion allowance, but the future production could also be taxed at a lower marginal rate. I think that the rules have changed on inter vivos trusts on children over 18, so again ask your CPA or Tax Attorney.

Here is what I learned about New Mexico minerals held in trust: If minerals are held in trust for Person A to have the income during his life, and then upon the death of Person A, the minerals are inherited by Person B: All bonus income can go to Person A, but royalty income has to be held in the trust (plowed back into corpus) for Person B. In my example, I was Person A, and I am sure the testator had no idea that Person A wouldn't be able to enjoy ALL the income from the minerals during his life. The law changed after the estate-planning was completed! In addition, the attorney who prepared the estate planning documents was not good at explaining things. He flat-out told me that he was sure the testator never understood the full effects of generation-skipping. In my family, to make matters worse, the trust officer made some misrepresentations to me and to my parents about the tax benefits of generation skipping, how the taxes would be calculated, whose share of the inheritance the taxes would be paid out of, and exactly how much would be left for each party. Proceed carefully, and if there are multiple states then you need to consult attorneys in each state, and you need to consider that laws can be passed later which interfere with what you intended when you signed your documents. My own attorney told me he never recommends any gen-skipping unless the estate is at least $6 million, by the way. I am pretty cynical about trust companies, and I am painfully aware that some attorneys are not nearly as good as others.