Once royalties began, what would you have done differently regarding your income taxes?
Would you have set up a business for the income?
Set up a grantor trust?
Did a 1031 to defer taxes?
Did oil and gas investments for the tax deduction?
Thank you for your comments.
My Grandfather left all his in Trust for his 5 kids and second wife. Then it past to their kids and on and on. All my taxes are paid by the Trust so it’s not a tax burden to me. Best of Luck, Chris
I put mine into a trust as a long range estate plan.
I could be completely wrong but this is how I saw it. Say I have a 2.5% interest. When I’m gone it would have to go through probate giving my 2 kids 1.25% each. My daughter has no children so when she passes her part goes over to her brother or his kids (probate). When he passes his part goes to his 3 kids (probate). As you can see you start to have a lot of probate costs and fractional shares.
By putting it into a trust it’s once and done. In the trust documents I specified how the proceeds were to be divided (yearly) based on who was alive. It’s spelled out in some detail in the trust language. I also listed a line of future trustees down through the grand children.
Once a trustee passes I think it’s a simple process for the next trustee in-line to take over.
With the trust they also updated our wills to be in-line with the trust plus new POA’s, MPOA’s and living wills.
A trust is like probate being paid upfront, but only once. In addition, the royalty shares are held as 1 unit and not split into many fractional shares. Eventually the royalties will probably become worthless and the trust goes away.
Ancel:
Most people are better off with a trust especially if interests are fairly small. Generally, you will not need a separate tax return and it eliminates a level of complexity. Visit with an estate planning attorney in your state. If the minerals are located in a different state make sure that they are properly transferred to the Trust or Trustee according to the laws of your home state.
This post is not legal / tax advice. No attorney client relationship is created by this post.
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