When you own land, like a farm or a ranch, you also own what lies beneath the land – its mineral rights. In fact, you may even have sold off the land at some point but retained the severed mineral rights and the royalties that go along with them.
How you convey your mineral rights to the next generation, however, can be a bit of a mystery. Here’s what you need to know:
First, you need to define exactly what you want to transfer
If you still own the land and the mineral rights together and want to pass everything intact, it’s a relatively simple process. Once the deed is transferred to your heir’s name, they will also own the mineral rights.
However, you could also own mineral rights without owning the actual land. Often, that happens when land has been sold off in the past but the mineral rights were retained. You may have a full or shared interest, depending on how they came to your hands.
Or, you may hold royalty interests tied to the minerals beneath your land. In that situation, the mineral rights may have been leased to an oil or gas company in exchange for royalties. That means you can pass on the royalty interests in your estate.
Then, you need to decide how you wish to transfer what you own
There are generally three approaches you can take toward passing on your mineral rights:
- Gifting the deed to the mineral rights to your heirs while you are still alive: This could be a good tactic if you’re financially secure and you want to reduce the overall value of your estate.
- Including them in your will: This is common, but it does mean that your estate must go through probate. If that’s not desirable, you may explore other options.
- Putting them in a trust: This allows you to bypass probate with this part of your estate (and, quite possibly, other parts of it, as well). If you use a revocable living trust, you can even retain control over the assets until your death.
When you have some unique assets to your name, estate planning can become a bit complicated. Spend some time learning more about all your legal options so that you can make informed decisions and get the estate plan you both want and need.
