Replies to This Discussion

Permalink Reply by RONNY on March 10, 2011 at 8:26

 Taurus,

Please enlighten us on some "ways" not mentioned here.  I know some smart O and G attorneys who've transferred minerals within the family and the deed read "for the love and affection I have for my son or daughter"  For present day valuation of mineral holdings you can do no better than what a professional mineral acquisition company will pay you for your holdings, TODAY.  Any future value assigned will be speculative.  JMO

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Permalink Reply by TAURUS on March 10, 2011 at 8:55

Ronny,

   You're welcome to send me a friend invite and we can schedule a time for you to come by my office and discuss. I really hesitated to say anything at first because I didn't want to appear to be soliciting on the site. However, I did send Keith a message this morning to inquire about becoming a site sponsor.

 

   That said, I will say this, one needs to consider what the motivation for the transfer is. What is it you're trying to accomplish. What are the current and future tax implications. Are there lookbacks? Etc, etc, etc .... What is the financial condition of the children? Could they have issues that present themselves in the future such as creditors or debtors that present themselves? Maybe a bankruptcy or an accident of some type that leads to them being sued and someone coming after the assets you transferred to them? What about divorce? Seperate property? Maybe? But what about the income from the seperate property? Joint? Maybe?

It's about more than just transferring the interest usually. It's about maintaining it intact and within the "core" family. Most of my clients are worth 8-9 figures. I have these conversations on a regular basis.

Disclaimer: I'm not an attorney nor do I give tax advice. However, I do know the questions to ask these individuals and I have the resources in my network to get them answered as well as the tools to address those answers.

Sidenote: Certainly don't intend to take anything away from what anyone has said here.

 

I'll also say this, when I discuss strategies to address things like this, because of my licenses and compliance issues I have to discuss them in whole and usually with disclosures that I give to clients. Hope you can understand Ronny. The offer stands to schedule a visit though. :-)

 

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Permalink Reply by Joe Aldridge on March 10, 2011 at 10:32

Ronnie,

I think you are saying the same thing in your post that I said in the first post of this thread. I feel that if you get an offer to buy as of a certain date then that would be enough to satisfy IRS for a transfer within a family. Tauraus brings up some interesting long range questions that might need to be answered.

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Permalink Reply by P.G. on March 10, 2011 at 10:18

Do that with a car transfer and they will pull out a book and charge you tax on fair market value.. Would they have such a book for Mineral Rights?

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Permalink Reply by Joe Aldridge on March 10, 2011 at 10:34

NO, They rely on an appraisal as of the date of death.

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Permalink Reply by P.G. on March 10, 2011 at 11:52

I can see some kind of a formula it if there were royalties or some kind of income flow but on a "Right" where minerals aren't being produced under the property? I mean landmen seek to lease those rights for a living and likely know very well what the value of a particular mineral right on a particular property could be worth to his/her client but the value to the mineral owner ends up being dependent upon how well versed or how stupid the Mineral ownwer happens to be. Just don't see how one can appraise a right...

 

Permalink Reply by TAURUS on March 10, 2011 at 12:49

P.G.

"Rights" are valued everyday millions of times over. I'm not sure how familiar you are with the stock market but there are "Rights" and "Warrants" (another kind of Right) that give the investor the "right" to do something and are considered Securities. Options are the same essentially. "Calls" give you the right to "Buy" a Security where "Puts" give you the right to "Sell" a Security at a pre-determined price for a specific period of time.

 

The O&G companies obviously valued this "right" highly back in 2008. It's what allows them to produce the minerals.

 

Here's a thought ...what if you transfer mineral rights/interests to someone but 10 years of no production or activity go by and they revert back via prescription to the original transferer - in this case Mr. Styles? Did that accomplish what the transferer intended? Perhaps not.

 

I need to read Mr. Styles original post to see why it was they were wanting to transfer them.

 

Edit: Just read through all the posts again and didn't really see where Mr. Styles stated a specific reason for the transfer, although some posts referenced estate taxes.

 

Mr. Styles, I would seriously re-consider a transfer without first addressing the bigger picture.

Permalink Reply by Jimmy Stiles on March 10, 2011 at 13:15

We are gifting them to our children now, and hopefully well before death. Don't know how they could transfer back once they are "given away" at FMV (maybe that's different than a transfer?). With the assumption the value is less than 5 mil this year and next (which it will be), there would also be limited tax repurcussions as I am aware.

 

I do appreciate the offer and information, and we are currently working through all of this with our family CFP and CPA (both). I think the main thing we need to have is the "Qualified Appraisal" of the FMV.

Permalink Reply by TAURUS on March 10, 2011 at 13:46

Mr. Styles,

Do you intend to transfer/gift the ownership of the land to them as well as the mineral rights or are you just seeking to transfer the mineral rights?

Permalink Reply by TAURUS on March 10, 2011 at 14:32

Mr. Styles,

 

You had asked the question: "Don't know how they could transfer back once they are "given away" at FMV ....."

Are you familiar with the "Prescription" of Mineral Rights in Louisiana?

 

You can search the term in the search box in the upper right on the homepage.

Permalink Reply by Joe Aldridge on March 11, 2011 at 3:07

Jimmy,

As I understand it. If you transfer the minerals without the land then the Mineral Rights will revert back in 10 years if there isn't any exploration/drilling. Exploration/drilling extends the other persons minerals another 10 years even if the hole is dry. That is whether you donate, give, or sell them to the family members. You can do an undivided donation of the land to the "kids" on a simple land appraisal if the property is not in production at this time. In that case the minerals will stay with the land donation and not expire in 10 years with prescription. This is what my parents did back in the "hot" days of the Tusc. down here in EBR for my sister and myself. The IRS did not contest the transfer at death. But it was done by the book so to speak. The problem is the land is valued much higher than unproven minerals and the amount you can transfer will possibly be very small.

Permalink Reply by Jimmy Stiles on March 12, 2011 at 5:55

I am continually being educated and appreciate the information. I guess I needed to be even more clear about our situation in that we no longer own the land and just retained the mineral rights, which have been passed down within the family back to at least 1945 (I'm sure much earlier than that).

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