I'm new here and need legal help. My mother left her 5th. Of mineral rights to my dad who is 95 and he wants to put the rights into a corporation and issue stock to each of his surviving children to keep any of us from selling off their portion of the rights. My mother had stressed that we were always to keep the rights together and pass on to our children and so on. He didn't know if he should place the rights in a corporation before he passes or let me and my brother do it after he passes. My brother and I are joint executors but don't know if we can put them in a corp. without permission of the other siblings or would it be better for him to do it while he is living and has full control of the rights. What should we do to honor my mothers request.
Darrell,
First let me say, I am NOT an attorney and would recommend you discuss the situation with an attorney.
That said, if you wait, you will need to go through probate, which can be very dicey. Our family established a sole member LLC, which is a pass-through instrument and upon demise, the LLC will declare if it is a Sub S or Sub C corporation, with shares being distributed as desired in the estate planning. Additionally, as shares in a LLC, there can be specific rules established in the by-laws, directing how the shares are to be traded or conveyed. (The LLC has first right of refusal on any sale of shares, etc.)
Keep in mind, different states regulate things differently and that is a factor to be considered, our LLC is Ohio based, with the minerals located in West Virginia, another contributing factor that needed to be weighed.
Feel free to contact me if you have any specific questions.
Best of luck,
Cheers
Darrell,
In my book, your mother and father have great instincts. Get a lawyer to form and LLC and title the mineral rights there as appropriate. In the LLC set up with your Dad as the incorporator, specify that only his and Mother's direct decedents may own shares and may not pass them on any other person but be redistributed to the current share holders at time of death not withstanding provisions in wills to the contrary. good lawyers know how to do this and it will keep the family together; the desire of your parents.
Gary L Hutchinson
Minerals Managment
I also am not an attorney but am a CPA. You could set up an LLC (which don’t have shares, but members) while your dad is alive. I believe if he makes himself and your mom as members, and they file a joint tax return, the IRS deems the LLC as a disregarded entity and it’s reported on their tax return. If he creates an irrevocable trust and your mom as trustee, the interests would bypass probate. Then at the time necessary, the trustee can create an LLC and move the interest into it and memberships created for the inheritors. Either the trust can keep the rights and distribute net proceeds to LLC, or keep all in trust with beneficiaries receiving trust distributions annually–lots of options
Consider an inter vivos trust (living trust) with a provision that prohibits the sale of the interest indefinitely (depending on which state the minerals are in, the rule against perpetual ownership may apply). By all means, consult a qualified attorney in the preparation of this document!