Hi, my brothers, sisters and I have inherited our mother and father's mineral rights. We have discussed setting up a trust, a partnership, corporation or an LLC and place all our our mineral rights into the entity. Has anyone else done this too? What advise can you give? Thanks
My situation is slightly different, because my father is still alive, and has three heirs. He set a trust up, based on both his lawyer’s and CPA’s advice, documenting his wishes, which with regards to oil and gas interests, was to receive the royalty money and deposit it to the trust, then immediately disperse the royalty payments to the three siblings, each of which would pay their own taxes. He also included language that would avoid any future controversy. He knows that money can sometimes change everything…what was once a good relationship between siblings could turn sour at any minute, due to greed, irresponsibility, incompetence, etc., so he wanted to ensure fairness, while at the same time, having everything legal made nice and tidy. If I was in your situation, I would not enter into a partnership, corporation or LLC with my siblings,but your relationships may be much different than mine. I would encourage you to consider legal, binding agreements to split things evenly, and be done with it. Then no one has to bother with the others actions or attitudes. And in the end, I can only urge you to consult with your attorneys and CPAs to get guidance on your individual situations, and hopefully you all can reach a mutual and fair agreement. Best wishes.
Yep, you said what we are trying to avoid. Disagreements in the future. We thought about dividing the mineral rights, five ways, but we learned that one could hold out and we all lose. No lease, no money because one person was greedy, had issues, or turned anti-oil. So all have agreed to set something up but we are not sure which way to go. We could do a C-corp, an LLC or trust. Just not sure what is the best way to go. Each has advantages and disadvantages.
Thanks
Ted
Ted,
One of my best clients is an LLC owned by three successful and professional siblings. The equal members of the LLC decided up front that they were not mineral experts and appreciated their fathers gift enough to honor his desires to share in the benefits of the great amount of time and expense he had spent putting the mineral estate together while they were children growing up. The members each have families and busy lives and no experience in minerals.
They wanted to keep the mineral estate together but not burden any one of the members with the impossible task of pleasing all the members. They found me, a professional mineral manager, and with my advise set up an LLC with one volunteer as President. He collects the royalty checks and bonus checks, pays my management fee and distributes funds monthly to the members who are each responsible for their own taxes. I take care of everything else. Negotiate leases, monitor drilling and production, work out problems, and evaluate each property.
If you have a sufficient number of properties and want to keep your family speaking and enjoying each other for the long term, I suggest you consider this alternative. Responder "KD" has a very knowledge and farsighted father.