My brother and I inherited a few dozen mineral properties in Oklahoma. I’ve been told by a mineral rights attorney that we should establish a trust for shared ownership and distribution, by an estate attorney not familier with mineral right inheritance to establish and LLC, and my tax professional suggested a legal partnership. Neither of us are from Oklahoma; my brother lives in Pennsylvania and I live in Michigan. Your advise on what to establish would be appreciated!
I’m in the exact same situation. My brother and I also recently inherited mineral rights in Oklahoma. I am in Wisconsin and he’s in Florida. Our minerals have already been split 50/50. My question is similar to David Buckley’s. I’m wondering the pros and cons to starting an LLC, or other entity. I see some people have their minerals as a personal business, and I’m wondering if there are any incentives; mostly writing off attorney expenses, and of course any other reasons I’m not aware of. I’ve heard of depletion deductions, but then I would have to pay money to have my mineral rights assessed for a value?
Many people have set up LLCs to manage minerals. Unless there is a vast amount of minerals owned I don’t see the advantage. If minerals are owned by a trust, there is no separate tax id number while the grantor or grantors (person or persons who establish the trust) are alive. The LLC will require additional tax returns and compliance with the Corporate Transparency Act. see link below:
If you already have a trust, it is relatively simple to transfer your minerals into it and thereby gain probate avoidance. If you establish an LLC, either the membership agreement has to be carefully drawn up. Even then you would probably want a trust and convey the LLC into it.
Also, having an LLC may cause some problems down the road if there is a disagreement. Who breaks a deadlock in a 50/50 ownership? If the minerals are owned individually, or in a trust each can make their own decisions in the event of a disagreement. You could also work as a team when negotiating leases.
Here are some links to previous posts you might find useful.
Keeping Mineral Interests Out of Oklahoma Probate Courts - Blogs - Mineral Rights Forum
New Corporate Transparency Act May Impact LLC Attractiveness - Law & Legal - Mineral Rights Forum
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
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