My mother died recently. She was 97. Luckily in the final yeas of her life she got to see some decent checks from Apache for drilling/lease/and some production. Wished my father, who died 5 years earlier at 93 could have seen it. The old doodlebugger and engineer would have loved to see the drilling and production improvements. In any event, it appears the three sons are going to split up the 25 percent share she had in the Griffin family property near Toyah. Don’t guess the headaches will really start until we try to sell, if ever. Of course there are taxes to be paid and from the valuations on three of six wells we have seen, those valuations are way down from last year. I will be visiting with our estate lawyer to see what he thinks of the three sons consolidating their mineral rights into an LLC. Thinking it might make things simpler moving forward. Might make it more appealling to sell as well.
You might want to also get the estate lawyer to get an appraisal of the mineral rights and family property as of the date of death and six months later. You will need that number if you ever decide to sell (capital gains reasons). Much easier to do it now as part of the estate probate than later. The fees can be part of the estate expenses.
Basically all liquid assets have been distributed with the exception of the home and the mineral/surface rights, so the fees will be coming out of the son’s pockets. But do understand the value of getting the basis established - believe I ran through another posting in which you were a contributor regarding a similar scenario.
If you do the evaluation immediately after death, you can use some forward projections of value using any currently producing wells. If you wait a few years, you can only use the value of similar sales in the area. I am not an evaluator, but have had to settle several estates and have had two different evaluators tell me that.
The alternate valuation date, which is six months after the date of death if property has not been sold can only be used if it both reduces the value of the estate and the amount of the estate tax due. As to the LLC, there are a number of issues to be considered in determining its structure as well as tax issues. The structure is not a one size fits all.
Correct. It is always good to get competent legal and accounting advice when probating an estate. Generally, the appraisers do the date of death calculations based up the knowledge known at the date of death and the prices for oil and gas as of that day. plus any wells that have spud or are likely to spud within a few months. The six month second look only changes the prices for that date. Then the executor may pick which one is more advantageous for the estate as mentioned. My point is do the evaluation as close as possible within the first six months after death as waiting a few years to do a look back is much more difficult and not likely to give as good a step up value. They still have to use the prices as of the date of death or the six months, but my appraisers told me that you can only use the forward looking possible drilling if you do the appraisal immediately. Appraisals done years later can only use similar sales nearby. May vary by state and the rules may change over time.
would not the appraisals utilized at Reeves County Appraisal District be a reasonable base for valuation? After all those are what the government values the mineral and surface rights at. For some reason, that appraisal district has not been responsive to any inquiries regarding missing appraisals for three of the wells on the property. Have tried phone (no one picks up and no one returns calls, and email and no one returns those as well). Wish we had sold these mineral rights middle of last year when we could have gotten an OK, not great, but OK deal on them.
The competency of appraisal districts varies county to county and whether your property has been properly valued would require an analysis by a person experienced in valuing such properties.
I also,
Have been unable to get through to the RCAD . . . . . . they were not answering the phones every time I tried. I figured that it was due to the “Pandamic”.
@sclausen has given you good advice, and, while our little partnership has been rolling along, I do believe that “Mineral Values” need to drop appreciably for this year. We have already received our notice and they do not, in my opinion, reflect this year’s “Real Value” for our property.
My best regards,
SW
I understand the rationale of consolidating the ownership into an LLC, a trust or a single entity. However, while the three of you get along, sometimes, problems arise when you get cross-generation ownership. In other words, one of you is alive, and the other 2/3 is owned by the children. Sometimes, not always, they resent the management of the elder individual, because they think that person doesn’t need the money and they do. Or, they marry a spouse who starts talking into their ear. Not saying you shouldn’t consolidate, but it may lead to family squabbles down the road.
I can see where that could go south in a hurry. Definitely fodder for thought. As it stands, we are probably just going to stay on our own. I did talk to a Sharla (she said with an S) and the Ash Unit wells on our property are valued at $0. So if that holds up and tax rates remain as indicated in the notices we received to date, taxes on the mineral rights will drop from $16K last year to about $1800 this year (for mom’s 25%).
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