The right to exploit a piece of property’s natural resources are often referred to as its “mineral rights,” and it exists as a distinct asset that’s independent of the surface land itself — which means that they can be bought and sold independently of the surface land. Those mineral rights can often be quite valuable and affect the tax liabilities of everyone involved. For example, if there is a pocket of natural gas or oil below an area of otherwise unused land, the heirs holding those mineral rights may benefit considerably.
However, because the surface area of the land and the mineral rights underneath it can be sold or willed separately, there’s often a lot of difficulty tracking down exactly how many heirs are dividing up those mineral rights — and it isn’t uncommon to inherit a fraction of the whole.
For example, imagine that your great-grandmother sold off a parcel of land during the Depression but had the foresight to keep the title to the mineral rights. She then left the mineral rights equally to her two children. They each owned one-half of whatever minerals are there to be mined. If they each had two children and did the same thing, each of their heirs only owned one-quarter of those rights. If the same thing happened again, you would eventually inherit only an eighth of the land’s mineral rights.
If mineral rights surface during the examination of an estate, part of the executor’s duties is to determine how to properly value the mineral rights for the purposes of taxation. That means the executor also needs to determine exactly how big of a share each of the current heirs in question stands to inherit.
Executors may also have to determine whether or not there is an active mineral lease on the rights. A mineral lease gives a company, usually an oil or gas developer, the right to mine and sell the minerals for a certain number of years. If a company has a lease, they aren’t necessarily obligated to develop the minerals — but it can stop a current heir from profiting from the sale of those mineral rights elsewhere until the lease expires.
If you need help handling complex estate administration duties that could affect the tax liabilities faced by the heirs, consider contacting an attorney for help.
Source: www.mineralweb.com, “Mineral Rights Inheritance,” accessed July 05, 2017