Does anyone know,

Do these leases carry over to our heirs or are they only good while the lessor is alive. I was told that the royalites do not transfer!!!!! is this true.

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Permalink Reply by Clinton44 on December 11, 2012 at 10:00am

Hi Joe,

I would think unless the mineral rights were split from the surface rights that the lease as well as any royalties generated would carry over to your estate and then be transfered to your heirs.

Permalink Reply by Keith A Williams on December 11, 2012 at 10:03am

Joe,

Read your lease. I would bet it states that it transfers to whoever owns the land or the mineral rights. The Lessee would never want to sign a lease if it stopped when the landowner dies.

 

From a CHK lease:

SUCCESSORS.  All rights, duties, and liabilities herein benefit and bind Lessor and Lessee and their heirs, successors, and assigns.

 

Keith

Permalink Reply by LW on December 11, 2012 at 10:30am

This all needs to be figured out now and by a professional who knows about estate planning.  Finding that somebody seems to be the problem. 

  Federal inheritance tax seems to be the worry and how much that will be at any given time.  There may be be an issue when whoever inherits that they will have to sell to come up with the tax due within 90 days.  I have heard that this tax might be calculated on the amount the wells will produce over an average well lifetime. And then that is based on the wells around you if you are not in production.  I met with a financial lawyer to talk about a trust.   He made some suggestions, such as putting life insurance within the trust with the property.  Then it will provide the funds if necessary to pay the inheritance on time because it doesn't have to go to probate.  I can't afford the life insurance amount suggested , so I am just hoping that the $5mil inheritance law continues into 2013 and so on.  I don't see why it should be taxed over and over again anyway.

Then you have to worry about what you may need in case of events down the road, such as illness, for yourself.  If you put it all in the trust, then what? Can it come out in an emergency so that you can sell if you need or want?   I have heard that it is better to get the trust before it is producing, but I still have so many unanswered questions.

  Some sort of conservatory trust sounds interesting, but from what I understand it is hard to do if you are in a lease.   AND then what about the kids that you are doing all of this for anyway.  I doubt my siblings would maintain property together and remain friendly.  Do I want that pressure on my kids?  Should they just sell and split?  Do you just put the royalties in a trust and they can sell the surface?  I don't like the idea of the  separation of minerals from the land ownership.   What to do, what to do?

Permalink Reply by rmc on December 11, 2012 at 11:57am
Just rember what a freind told me once they are all good problems to have.
Permalink Reply by LW on December 11, 2012 at 12:17pm

haha! Absolutely!

I just don't want anyone spitting on grave for something that I should have handled!      (just joking)

Permalink Reply by joe on December 11, 2012 at 12:22pm

Thanks for the replies It scared me when they said it does not include heirs and that the oil company get full use of it and wont pay our estates anyhing, it made me second guess myself.

Permalink Reply by Kevin Senich on December 11, 2012 at 2:20pm

A lease is an estate in the land. It survives the demise of the lessor.  The royalties go to whoever inherits the land through the probate estate unless the decedent/lessor has made a special bequest in his/her will that leaves the royalties another individual or individuals.

Permalink Reply by Jack Straw on December 11, 2012 at 2:40pm

RE: "I was told that the royalites do not transfer!!!!!"

I would suggest that you never believe anything said by the person who told you the above - because what they told you is pure nonsense!!!!!!!!!!!

 

JS

Permalink Reply by Tracy on December 12, 2012 at 1:36am

My father-in-law passed away in 2006 just before D&L Energy was about to put a well pad on part of his property. My husband and siblings decided to sell two of the three parcels of land that were part of the estate. However, they kept the mineral rights to the piece of land with the well for a period of 5 years because they knew that D&L was still going through with the well. So, all moneys from the royalties were divided among the siblings for a period of five years, which worked out very well because the royalties decreased dramatically after the 3rd year. Keeping the royalties for 5 years was a good selling point for the potential buyers also because they knew that they would get some money out of it in the long run. I'm in PA, and the royalties definitely transferred.   

Permalink Reply by joe on December 12, 2012 at 3:01am

Guess Im still thinking this is all too good to be true, Im not very trusting.

Permalink Reply by Mike Coles on December 12, 2012 at 4:12am

Joe,

The right to receive royalty payments is severable and can be held separately by the owner and/or the estate.  I have prepared mineral rights appraisals for the purpose of creating a trust under IRS rule and regs.  Beware of anyone who says they are not transferable.  On a broader scale, the amount of money involved with oil & gas leasing and royalty payments has attracted some unsavory characters.  Unfortunately, they look like normal people.  Seekout qualified professional and ask about their experience in the oil & gas industry.

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