Estate planning for oil and gas assets is becoming increasingly important. The following is an article that one of my partners Ed Buehrle initiated and I thought it would be beneficial to those individuals facing these types of issues so here is my slightly revised version.
Over the last 3 to 4 years, landowners in Tuscarawas, Carroll, Harrison, and Belmont Counties have experienced a significant increase in their net worth due to the oil and gas boom. With this increased family wealth comes increased responsibilities on the part of the family patriarch and matriarch to protect the family wealth. This shale boom has also created enormous opportunities for these landowners as well.
The problem is that some landowners are not sure what to dot. Of course these landowners are receiving advice from a number of sources such as friends, children, and other relatives. This situation may even cause family disputes to occur as each family member is positioning himself or herself as to what is best for themselves, and this may not be the best for the family as a whole. However, landowners should not rely on everyone else to provide direction because they do not see the whole picture and understand the family dynamics that may be occurring. Plus every landowner’s situation is a little different for a number of reasons so what worked for one may not work for another. They need to seek out advice for themselves from professionals.
Most landowners may not have the experience to understand what issues are important to them and their family to preserve their family wealth in these situations. Therefore the challenge for most landowners is to know what questions to ask in order to develop an estate plan to protect their family wealth in accordance with their wishes. In addition, each situation is different in that landowners have different priorities, family dynamics, and needs. Therefore it is critical for the landowner to assemble a team of professionals such as an attorney, accountant, financial advisor, banker, etc. to help them in this particular situation. Each of these professionals provides a specific skill set which when combined provides the best results for the landowner.
When working with an estate planning attorney, the following are some of the common estate planning goals that most landowners are interested when developing their estate plan:
i. Probate Avoidance;
ii. Control of Your Assets;
iv. Asset Protection; and
v. Tax Planning ( income gift, estate, and generation skipping transfer tax liability)
Specifically, the following are some of the planning which may be discussed and undertaken for oil and gas assets such as:
i. Severing your mineral interests from your surface interests into a separate limited liability company;
ii. Drafting the limited liability company operating agreement in order to determine business planning matters such as succession planning and valuation issues on gifts of the units of the limited liability company;
iii. Use of tax savings items such as the depletion deduction if possible after determination by limited liability company accountant.
If you are a landowner in this type of situation, please contact your estate planning attorney to assist you with these planning matters.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
158 North Broadway
New Philadelphia, Ohio 44663
Phone: (330) 364-3472
Fax: (330) 602-3187