I have had an offer either to sell or lease some of my mineral rights.
My income is dependent upon SSDI and I was wondering how that affects that.
I can not afford that in any way to be jeopardized as that is how I pay my bills and it will be a few more years that I would be eligible for Social Security.
Can you tell what would be the difference between selling and leasing in relation to that?
Thank you
I am not an attorney. There are several threads on the forum regarding that question. If you lease, the amount of money is rather small versus selling, but whether that kicks you over your limit depends on your particular situation. The lease is an amount per acre for a paid up lease for a particular time-usually three years or five years. You get the payment up front. If the operator drills and the well is successful, then you will get royalty income as long as the well produces. Not sure about the rules on royalty income with regard to SSDI. And they may never drill, so you might get a little bit of money now and not sure about the royalties. Depends upon where you are and how many acres you have to lease or sell.
If you sell, the sales amount is likely to be larger than the upfront leasing bonus and that one time payment could throw you over the limit, but again dependent upon your personal situation. Also, you may be have to pay capital gains tax depending upon your tax category.
You need to ask questions to an attorney that specializes in elder care or SSDI law.
Here is a quote from an earlier post on SSDI from Richard Winblad.
“For impact of unearned income on SSI benefits see here: Social Security Website”
Have you ever been asked to prove the value of the minerals in order to continue SSDI? I’m also not an attorney, but I think there may be some benefit into selling if the royalties would be so little it wouldn’t affect your income need any (but could reduce SSDI still; I think the requirements are pretty strict, right?). I think they might be considered two different types of income that are handled differently (EDIT: just saw Martha’s link to “unearned income”; this is what I’m thinking of). Something to look into with someone who knows more about the technicalities.
There is also an option to lease with no up front bonus and with an increased royalty rate instead, depending on what bonus you’re being offered. For example, if you were offered $200/acre bonus at 3/16th royalty, the lessee might also agree to $0/acre bonus at 1/5th. This way you would only need to worry about income if wells were actually drilled and started producing. Acreage with drilled and producing wells are easier to sell either way, and it’d be a good long-term royalty to have if you kept them.
If you’re ever required to prove the value of your minerals for SSDI to continue, there are also at least a few appraisal groups who will help out at a steep discount due to the circumstances. It’s quite a pickle to be in, and I want to make sure you and anyone else reading this who needs it knows that there are places to turn to for help. I think the minerals need to be producing for the gov to pick up on the fact they exist and need explaining, but just FYI.
SSI has means tested eligibility meaning some assets like minerals or cash can disqualify the recipient until resources dip.
SSDI is generally for individuals who became disabled but have worked a sufficient amount of quarters and therefore their assets are not an issue.
While I am an attorney, this is not legal advice nor does it create an attorney client relationship. Visit with an attorney in your jurisdiction.
Whatever you do wait till oil goes up. Leasing you can get money over and over…never lease without goodly cash bonus for royalty …plenty of “well meaning” cons out there!
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