Estate Planning for Mineral Rights and Royalties: Key Considerations for Estate Planners and Property Rights Holders

The mineral estate and royalty interests are valuable assets that cannot be ignored in estate planning. Estate planners must understand the characterization of mineral rights and royalties and planning methods to maintain family ownership and minimize taxes.

Mineral rights are part of various ownership rights connected to a piece of real estate, allowing the rights holder to grant use of the land to others. This involves granting control of the land (surface estate) and controlling what's beneath the surface (mineral estate). Typically, such rights are provided to a company that explores and extracts oil, gas, etc., from the land or for developing energy projects and facilities.

The treatment of mineral rights can vary; some states treat it as a real property right, while others treat it as personal property rights. In addition, holders of mineral rights and royalties risk adverse tax liability upon death unless they take proactive steps to ensure these assets pass to their heirs or beneficiaries. Unique planning factors apply to mineral rights and royalties that counsel must consider, such as the ownership of the land, valuation, inheritance issues, holding and transferring rights, and complex tax regulations.

Estate planning counsel must know how these nuances impact estate plans and the available transaction structures to ensure efficient estate administration.

Listen as our panel discusses practical techniques for gifting and transferring mineral and royalty rights and offers guidance on instruments of conveyance and other critical estate planning issues for mineral interests and royalties.