A lot of my clients are recipients of oil and gas interests unknowingly and they typically find out they own interests only once they start to receive phone calls and letters in the mail from mineral buyers wanting to buy them! It’s funny how life can surprise us, isn’t it?
So, How Did They Actually Make Their Way To You?
There are several ways mineral and royalty rights can be inherited. One way is through joint tenancy, which allows two or more individuals to own mineral and royalty rights together. In joint tenancy, each owner owns an equal amount, or 50%. When one owner dies, their 50% share of the rights is automatically transferred to the surviving owner.
Very similar to joint tenancy, but only available to married couples, is through tenancy by the entirety. In this case, the surviving spouse automatically inherits the deceased spouse’s share of the rights.
It is also possible for mineral and royalty rights to be inherited through a trust or other legal arrangement. For example, an individual may set up a trust to hold their rights and specify who should inherit them after their death. In this case, the trust would be the legal owner of the rights and would distribute them according to the terms of the trust.
However, the most common (and unique) way for mineral rights to be inherited is when a mineral holder dies without a will and their interests are passed down to the next surviving heir, which could be many generations passed. This happens very often and fortunately, we have a lot of experience helping newly inherited owners that have little to no mineral and royalty ownership experience.
Inherited Mineral Rights
How To Handle Inherited Mineral Rights
If you suddenly find out that you have inherited rights because mineral buyers are calling and offering to buy them from you, the first thing you should do is exactly what you shouldn’t do – don’t agree, do, or sign anything with them. It’s very important that you understand as much as you can about your asset(s), such as:
- What you own
- Where it is
- What’s going on in the area
When it comes to dealing with buyers, the best thing you can do is stay calm, don’t allow yourself to be rushed to sign their offer because it’s very likely that it’s going to be low (even if it’s more money than you’ve ever been offered in your life!). And don’t worry, offers don’t expire right away, as they like to tell you. You have time to see if it’s worth what they say it is, but might want to consider starting to engage in conversations with reputable industry professionals like Landmen who can help you if you are new to owning oil and gas interests.
Read our article, “Did you get an offer to buy your minerals that blew your socks off? Here’s why….“.
It’s imperative that you start to educate yourself on mineral and royalty rights ownership. We have quite a few videos like this one to help get you started.
Are Inherited Mineral Rights Taxable?
If your assets are producing, you will be liable for paying taxes on minerals and royalties. If you are considering selling your minerals, or have sold your inherited interests, you will need a Retrospective appraisal to determine the basis value of your interests at the time of inheritance. Failure to do so can be a very costly mistake that you do not want to encounter when taxes are due, especially when it is completely avoidable.
Learn the difference between Retrospective and Current Appraisals and which one is right for you.
Be A Responsible Mineral And Royalty Owner
There are many best practices to adhere to when owning oil and gas interests. It is a responsibility that can require significant time and attention and knowing how to manage and treat them as an investment needs to be a priority.
It is important to seek professional guidance if you are unsure of your rights or the rights of a deceased loved one. An experienced Landman can help you navigate the process and ensure that your mineral and royalty rights are properly transferred according to your wishes. (An attorney can help you too, but their costs will be much higher.)
We can help you understand your newly inherited assets. Our aim is to teach current and new mineral royalty owners everything (or almost everything!) there is to know about mineral and royalty ownership. We have tons of information in our blogs and on our FAQ page.
You can schedule a complimentary consultation with us so we can discuss your situation in detail.
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