Replies to This Discussion

Permalink Reply by Ken A on April 12, 2014 at 7:00am

I would strongly suggest that you speak with an attorney and/or an accountant before you do anything.

Permalink Reply by Philip Thackray on April 12, 2014 at 7:56am

Big,

You will need a lawyer(s) for sure.

I'm in a similar position, looking to push income out to other family members who are in lower income tax brackets.

The squeaky clean way to achieve what you want to do is to give up ownership of the mineral rights whose income you want to go to your siblings.  You can either deed the mineral rights directly to them or deed the mineral rights to a partnership.  If a partnership, then each individual's percent ownership of the partnership will determine their taxable income based on overall partnership proceeds. 

From what I have seen, any scheme that allows you to own the mineral rights while distributing royalty income to your siblings has a good possibility of being rejected by the IRS putting the tax burden back on you.

Since the mineral rights have value, the deeding itself may have tax consequences and so will the bonus payment.

You will need and oil and gas lawyer and an estate planning lawyer.

If you or someone else sees a way around the scenario above, please post that here.

Regards,

Phil

 

Permalink Reply by Bignose99 on April 12, 2014 at 9:24am

Thanks for the advise Phil.  I had been leaning toward creating a family farm partnership and deeding the rights to the partnership.  It seems the path of least resistance would be to deed the gas rights directly to each of my siblings.  I will be meeting with an attorney this coming week.  He has the lease currently looking it over.  I have been dealing with Roger Mechling from Kittanning.  

Permalink Reply by Philip Thackray on April 12, 2014 at 9:58am

Big,

A partnership adds another layer of accounting but it does give you some wiggle room especially if you are the General Partner.  You might consider adding one shale layer at a time to the partnership – that would leave options open to you as you move into the future.  Things always change.

I hope your lawyer has direct experience with the local XTO, Rex, Range etc type horizontal well leases.  Your guy in Kittanning may have a lot of experience with the shallow vertical wells over there but that may not serve you well back here in Butler County.  I have negotiated or re-negotiated four horizontal oil and gas leases with Phillips, XTO and Rex.  A lawyer who knows what will fly with the local companies matters.

Good luck!

Phil

Permalink Reply by Paul Danik on April 12, 2014 at 9:05am

I would highly recommend Amy Molloy @ S.R. Law located in Slippery Rock, 724-794-2929.  She is a wonderful and very knowledgeable person who is very well versed in all such matters pertaining to leasing, gas line Right of Ways and related matters.  I am confident she can help to guide you and your family in this matter.

Paul 

Permalink Reply by Philip Thackray on April 12, 2014 at 9:14am

I have heard good things about Amy Molloy as well.

Phil

Permalink Reply by Outback on April 12, 2014 at 9:47am

Form a partnership and assign the lease. That will govern the mineral rights.

Permalink Reply by Noah D. on April 13, 2014 at 11:29pm

You should consult a good estate attorney. Anthony Tedesco of Williams Coulson is excellent.