Planning for Mineral Rights in Your Financial Plan

November 8, 2019

In this part of the country, owning mineral rights isn’t uncommon but knowing what’s best to do with them might be. Whether you purchased or inherited those rights, they can be valuable assets, and regardless of whether you sell or keep them, mineral rights should be properly accounted for in your financial plan.

Understand your ownership options: First, just because you purchased or inherited property doesn’t mean you own the mineral rights associated with that land. In many states, rights must be purchased or leased separately. Due to variables outside your control, minerals aren’t necessarily a reliable source of income. Well production, commodity prices and the political climate all impact your potential return. Aging adults might choose to sell mineral rights in favor of a more secure and controlled investment, but if you do choose to sell, be sure to consult your financial advisor about how best to use the profits.

Maximize their value: What you do with mineral right royalties depends on whether you need immediate or delayed access to the funds. A wise investment strategy can help ensure they last over time, and planning is critical to ensure you minimize tax liabilities. Mineral rights should also be factored into your family’s estate plan as joint or trust accounts can be used to transfer royalties to future generations.

Mineral rights require more than simple asset management. To ensure they bring the greatest benefit to your financial situation, be sure to work with a financial advisor who’s knowledgeable in holistic planning, taxes and estate planning.

 

Blog by Aaron Waters, Wealth Advisor

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