Mineral Rights Held in a Trust
Mineral Rights Held in a Trust
If you’re responsible for managing mineral rights held in a trust, it can be difficult to know where to start. This free guide will explain everything you need to know about oil and gas rights held in a trust. As an executor, it’s important that you do what’s right for the trust. You have a responsibility to make sure you are making the best possible decision and this guide will help you do that. With the recent drop in oil prices, we have seen a number of trusts interested in finding out how to maximize the value of oil rights held in a trust.
Type of Mineral Rights Held in a Trust
The first thing to determine is the type of mineral rights held in a trust. The term mineral rights covers the broad category of mineral rights ownership. All of these different types of mineral rights are going to mean different things when held in a trust. You may need to manage royalties differently than you would manage non-producing mineral rights. To make the best possible decision about oil rights held in a trust, you need to first understand what you are managing.
Non-Producing Mineral Rights: If the trust is holding non-producing mineral rights, there is currently NOT any producing income from the mineral rights.
Royalties Income: If the trust is receiving royalties checks each month, the trust is holding mineral rights that are producing royalties.
Working Interest: If a working interest is held, there will be income each month but also some expenses that are due through a joint interest billing. The primary difference between a royalty interest and a working interest is that a royalty interest simply receives the income from production. A working interest gets the income but is also responsible for a portion of the expense as well.
How to manage mineral rights held in a trust
Non-Producing Mineral Rights: If the trust you are managing has non-producing mineral rights there are a few things you should be focused on. The first thing is making sure the appropriate taxes are paid. Holding mineral rights is just like owning land. There are taxes to be paid each year. In addition, if the property currently unleased, you should be actively working on finding an operator to lease the property. Upon leasing the property, the trust will receive a lease bonus based on the number of acres and it will make it possible for drilling to take place on the property.
Royalties Income: Once again, you will be responsible for managing the tax implications of the royalty income. In addition, it’s helpful to keep track of all the payments coming in. Ideally you should keep at least 12 months of the check stubs that come with each of the royalty checks.
Working Interest: If the trust owns a working interest, you should be more actively monitoring the property. At some point the expenses will become greater than the monthly income which actually costs the trust money. A working interest is typically held by a large entity or someone very active in oil and gas. As a trust, it can be a risk to hold onto a working interest so many choose to sell the working interest so they aren’t responsible for managing it. You don’t want an asset held into the trust to turn into a liability over time which is exactly what happens with a working interest.
Selling Mineral Rights Held in a Trust
When a trust is in the process of being dissolved or if the trust is interested in re-balancing the portfolio of assets, it can make sense to sell mineral rights. As a trust, one of the hardest things you will encounter is finding a reputable company who can help you through the process. The reason it’s so difficult is that most companies you will locate are simply buyers who want to purchase the trust assets for themselves. Since you have a responsibility to ensure the highest possible value for selling mineral rights held in a trust, you need an unbiased 3rd party who can help you with the sale.
We recommend you have US Mineral Exchange help you with that process. They are the best marketplace for trusts to sell mineral rights because they do not purchase any mineral rights themselves. They are an unbiased 3rd party focused on helping trusts and other mineral owners get the highest value for their property.
Questions about mineral rights held in a trust?
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