Mineral valuations are an animal of their own and have multiple complexities, but minerals also complicate surface valuations. Many times the issue is related to family inheritance and estate planning. Very seldom are all family members interested in taking over a farm or homestead, which often leads to one or more family members working out a way to purchase the property. Many of the problems start just like this story:
Our problem is – and I can’t really call it a problem – we hit minerals on our land. The income from the minerals is more than we ever dreamed of having. We’ve looked into ways of sharing this income with our children and need some ideas as to how to do that.
This is exactly the point at which estate planning becomes important. There are several ways to pass mineral rights down to heirs without paying a majority to Uncle Sam. Depending on the value, it can be as simple as leaving the minerals to your family in a will or might involve setting up trusts or family limited partnerships that make it easy to pass ownership while you’re still alive.
Secondly, when we originally set up our estate plan, our son was going to have a heck of a time being able to buy out his non-farming siblings. We had set up a plan where he could buy the land at way less than market value.
It’s funny how more money creates more problems, but you’d rather argue over who gets what than who gets the last glass of water…… While minerals are usually split evenly, the surface is not. The one brother who wants to carry on the farming tradition will make a push for the property and previously would have been sold the property at a discounted price. Now, he has more money. Is it fair that he gets the land at a discounted price?That’s for you and your family to decide, but it is one of the many questions you should think about when doing your estate planning. Don’t leave anything to debate after your gone. It makes it harder on everyone.
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