We are NOT interested in selling our mineral rights at this time but we are interested in finding the value of the mineral rights, The mineral rights are part of a trust and the owner of the trust recently passed away near Seattle, Washington. I am one of the trustees. We need to find the value of the mineral rights to complete the “value of assets at death” information to see if the trust owes Washington State estate taxes. The mineral rights are in Denton, County, Texas. I have not been able to find a source that can state in writing the value where I would be confident they would hold up to legitimate questioning by the state tax auditors.
You need an appraiser. Are the minerals producing? Under lease? Open for lease? Do you know the net minreal acreage and tract information?
Yes, the minerals are producing and under lease to Devon. We can't find an appraiser that will return our call. We only have 85.5 acres. Since there are so many other wells in that area of Denton County it shouldn't involve re-inventing the wheel. Surely there is a standard way of figuring this out. We have been told about a "going back 4 year " method but nothing official. Thanks
Hickman McClaine & Associates in Midland Texas. With producing wells, you do not need an appraiser in Denton County. They will need the name of well(s) and the DOI in the each well. Website: https://www.hickmanmcclaine.com/home.html
I am a bit confused. If the assets are in a trust, there is no owner of the trust, unless this was a life trust. generally, the basis of the assets is what the donor/settlor had when the assets were put into a trust. Perfectly fine to determine value of the assets, but not sure why the date of death is important to a trust. I am a CPA so i wanted to add my 2 cents. Valuation of mineral interests can be tricky or can be pretty easy. For Fed inheritance taxes, most will allow about a 3x last 12 months cash flows. So if you earned 10,000 on the asset for the last year, you could value it about $30,000. That is not "official" but it is what i have seen on a lot of form 706 returns.
If you google this, you might find other rules of thumb for valuing assets like these. Good luck
another thought--have you been paying ad valorem taxes to Denton County? They are supposed to be using "FMV" calculations for the mineral interests, and that can be another source of adequate information that can stand up to most auditors.
I used the wrong terms. Our dad was the trustor of a living trust. The Washington State estate tax would come into play if the assets in the trust at the time of his death was over a certain amount. I assume that the federal estate tax is similar.
Ron,
As a Minerals Manager, geologist, engineer, and mineral economist, I do appraisals of all sorts including official DOD Fair Market Value determinations in accordance with U.S. agency definitions. My clients are usually estate lawyers, accountants, Banks,Trustees, estates, and beneficiaries. I have even provided expert testimony re; mineral economics before state and federal jurisdictions. I prefer to arrange and administer mineral management business plans so this is not a solicitation for appraisal work but you can't find the person you are looking for, send me a personal message on MRF and I'll provide you with legal references in Washington, Oregon, New Mexico, Texas and Oklahoma.
Its really not that big of a deal to pin down if you have access to the production data, the title, and date of death. Area activity and some IRR determinations and you have it.
Thank you, I may take you up on that soon.
Yes, I saw those on the small slips that we were required to return to Denton County when the gas/oil taxes were paid. This is the first I have heard that those could be used. I don't have that information any more. Thank you.
The state felt that adding the last four years of income from the mineral rights was satisfactory and would be acceptable. Thanks for the help but hopefully this task is finished.
Ronald, I worked as an oil and gas appraiser for ad valorem taxes in Texas for several counties. This question came up several times from interest owners dealing with the same questions and concerns.
If you would like I can help you out, I just need to know the name in whom the minerals were owned at the time of death. If you need an even more thorough examination with decline curves, economic summary reports, etc. then I have a couple contacts that would do a great job.
Since only producing oil & gas interests are taxed in Texas AND the interests are taxed at the county level then the most fair and equitable evaluation/appraisal of those assets are determined through the appraisal process. From identifying new leases, updating prices which are based on the average price of the prior calendar year, past production history, a forecast of production which can be seen visually in a decline curve model. The initial Notice of Appraised Values are the first evaluation where appraisal consulting companies working for the particular county use an income approach to market value then make adjustments based on reasonable requests by agents/operators/interest owners as to pricing and/or lease operating expenses (WI owners only). If the valuation is not agreed upon then a protest is filed and hearings are scheduled for the Appraisal Review Board during the first 2 weeks of July. Usually protests are withdrawn or waived beforehand by working things out. However, those that go before the ARB both sides the agent/operator/interest owner vs. the appraisal consultant make their case for their valuation. The ARB deliberates, votes are cast, and a determination is then made.
Once done, the valuations are then certified and the tax roll is finalized. That is when the tax assessor comes into play and the "billing" phase.
Long story short - neither agents/operators/interest owners nor appraisal consultants earn a commission or bonus for having a higher or lower valuation. Without any such incentive, the appraisals either approved by both parties by mutual agreement or a determination by the ARB, is likely the most accurate valuation of the interest at hand.
Again feel free to message me and I will send you materials, work something up for you, and also can talk with you on the phone on how to best to handle this.
Don't worry, you will be fine. Several people signed off on the valuations for tax purposes in Texas from the individuals/agents/operators/appraisal consultants to the County Chief Appraiser and Appraisal Review Board to the State of Texas which defers to the county to handle these decisions and make these final determinations.
I admire your diligence and honesty in making sure that your valuations are accurate.
Dang, I guess I should have read your post right before i went on my rant! Haha well hope that it helps anyone else dealing with such issues.