Many of our clients have had the good fortune to sign leases that can provide security for not only them, but many generations of their family. However, much of this wealth can be lost to both taxes and long-term care expenses.
Here is a case study of how your wealth can be protection from such financial perils.
Mr. Smith, 75, had 200 acres and signed a lease for $5,000 per acre with an oil and gas company. After paying over 40 percent of the bonus payment to federal and state taxes, Mr. Smith is left with approximately $600,000. As he was growing older, he was concerned about him or Mrs. Smith needing care in a nursing home. Projected costs of nursing home care five years from now are as much as $10,000 to $12,000 per month! At those rates, what is left of the bonus monies and future royalties they may receive could be significantly depleted by taxes and long-term care costs.
Mr. Smith could address these concerns by establishing a family limited partnership and transfer his lease to the partnership. He could transfer to his children or heirs a limited partnership interest, which would cause the tax liability to be spread out among his family members, typically at much lower tax rates.
Additionally, provided that five years transpire from the date the partnership is established to when either he or Mrs. Smith is admitted to a nursing home, the royalties transferred will not count as a resource to them and will be protected from the costs of the nursing home.
Question: I signed an oil and gas lease, but after doing the title search the gas company told me that I didn't own the minerals. Is there anything that I can do?
Answer: Due to the historical coal, oil and gas activity in the Ohio Valley, it is common for landowners to not own their oil and gas rights and not even know it. Both West Virginia and Ohio law provide ways for the surface owner to potentially recover their mineral rights. Under the Ohio Dormant Mineral Act, if certain criteria have not been met by the owner of the mineral rights, steps can be taken to recover your rights. This process can take as little as 60 days.
In West Virginia, the surface owner can recover the mineral rights only if the mineral owner cannot be found. The process in West Virginia, however, takes seven years.
Jeffrey J. Rokisky is an elder law attorney with offices in Wheeling, Weirton, Elkins, Clarksburg and Robinson Township. If you would like to submit a question for publication, please email it to rrokisky@ rokiskylaw.com