Eliminating oil and gas royalties from an estate can lower the cost of settling the estate. Dividing royalty and mineral interests into smaller or fractional interests is a labor intensive, costly process and devalues those interests.
Oil and gas royalty and mineral interests are inherently illiquid assets and management of these interests can be a burden, even for large owners. If an individual or estate needs quick cash to settle outstanding debts or pay taxes and other fees, selling royalties and mineral interests can bring in a significant lump-sum cash payment.
The revenue stream generated is subject to the sale price and quality of the oil and gas produced. Selling a royalty or mineral interest upfront will eliminate the risk of declining oil and gas prices and price volatility.
Royalty and mineral interests are real property interests that must be valued and reported to the IRS for estate tax purposes. Instead of detailed reports that must be frequently prepared by the estate, the executor of the estate can sell the interest to alleviate the complications of paperworkburdens, tax obligations, and accounting issues. The necessity of calculating the yearly depletion percentages of these interests would be eliminated.
Income from oil and gas royalties and mineral interests is very complex and specialized. Cash generated from the oil and gas produced on the royalty or mineral interests is subject to severance taxes, ad valorem taxes, and both federal and state income taxes. An outright sale of your mineral or royalty interest is only subject to capital gains taxes.
Dividing oil and gas royalty and mineral interests among family members is expensive and labor intensive. Title opinions must be prepared and assignments of interests must be generated for each individual lease and tract. The recordation of these assignments must be made in the respective county courthouses where the properties are located. An outright sale of the entire interest greatly reduces the expense and paperwork associated with this process.
Unlike third party oil and gas marketing firms who charge large commissions and fees for the selling of your royalty and mineral interests, a mineral transaction with Windswept Royalties is completely free and clear of any and all charges associated with a transaction.
Oil and gas minerals and royalties are considered real property, and are therefore eligible for tax deferred 1031 exchanges. It is best to consult with your tax advisor concerning these exchanges.