Four Things Older
Mineral Owners
Shuld Consider Before it is Too Late
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Four Things to Consider:
If you own minerals in multiple state, our estate executor may have to open an ancillary probate in each state in order to transfer or sell the mineral rights.
Mineral rights are usually considered when evaluating your financial obligation for long term care.
Your mineral rights may need to be transfered to your spouse and then again to your children. It can be expensive to transfer the minerals.
It is very hard to sell small (and non-producing) mineral rights. It's better to sell while there is still value.
A Tale of Two Mineral Owners
Mineral Owner A decided to sell her minerals because she didn't want to leave her heirs with the burden of opening ancillary probate in another state and incurring the expense of transferring all her minerals, most of which generated very little revenue (and several were non-producing).
Mineral Owner A
Mineral Owner B left her entire estate to her husband and appointed her daughter as her personal representative. She probably had no idea that it would take her daughter years to wrap up probate and that her daughter would need to open ancillary probate in each state where she owned minerals in order to transfer (or sell) the minerals. It was an expensive and time-consuming process and sadly, the minerals were so small that they really didn't have much value.
Mineral Owner B
Avoiding Ancillary Probate
How can you prevent ancillary probate for mineral rights?
To avoid ancillary probate for mineral rights, you should consider either transferring your minerals to your heirs early, sell your mineral rights, or put them inside a Limited Liability Company or Family Partnership.
Consider Your Long Term Care Plans
If you choose to sell your mineral rights, make sure you do it 5 or more years before you anticipate needing long term care (different states may have different requirements).
Avoid Multiple Transfers
You can avoid this by transferring the minerals early (or selling them if your heirs are uninterested), or by putting the minerals in an LLC or Limited Family Partnership.
Sell While Your Minerals Still Have Value
It takes almost the same amount of effort to buy small or large mineral rights. The time and expenses associated with researching the minerals, providing a quote, drafting the deeds or assignments, and closing the transaction, can be more than the minerals will earn in a year!
Really small mineral rights may cost more to record in the county deed records than they are even worth.
If you are considering selling your minerals, do it while there is still value!
How We Value Mineral Rights
Minerals in the hottest shale plays are more valuable than those in older fields with conventional wells.
Producing minerals are worth more than non-producing minerals because they are generating revenue.
When oil and gas prices drop, revenue drops, and sometimes operators are unable to continue operations..
Highly productive wells (and off-set wells) can increase the value of your minerals.
Favorable lease terms (such as a 25% royalty) favorably impact the value of the leased minerals.
A small number of operators are unethical, and their reputation automatically devalues your minerals.
Why Sell?
Why People Sell Their Minerals Rights:
With the price of oil declining and operators practically giving gas away, I decided to sell before the bottom falls out.
I am on a fixed income, and the sale of these minerals will help me secure stable housing. My children will be okay if even if they don't inherit these minerals.
My oil wells have been producing for decades and the reserves are almost depleted. Once the wells are plugged, the value will be significantly lower. I'd rather cash out now.
I inherited mineral rights, but don't want to be involved with fracking and fossil fuels. I would prefer to support renewable energy and do my part to reverse climate change.
Although everyone says, "Never sell your minerals", my daughter needs a series of costly life-saving medical treatments. There are exceptions to every rule.