Mineral rights require special attention in estate planning. There are a multitude of facets to ownership, management and transfer. Using a family holding company provides for sound management and flexibility. A company may be a partnership, limited liability company or a trust, but generally a company should have pass-through taxation.
The goal of estate planning is a smooth estate administration, preserving asset value and transferring them to beneficiaries without unnecessary complications. At a basic level, transferring mineral rights into a company prevents mistakes in multiple transfers, provides for consolidated management and promotes economies of scale. On a more technical level, company ownership provides valuation and tax efficiencies as well as liability protection from an owner’s creditors. A company also helps owners realize more intangible goals such as providing for successive managers, promoting consistency of operations, defining permitted successor owners and creating mechanisms for resolving disputes.
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ABOUT THE AUTHOR
Lorni Sharrow, LL.M. (Tax)