Life is hard, and then the government steps in and makes it harder. When you lose a loved one, grief counselors, clergy, even funeral directors are there to guide and support you through your difficult time. Uncle Sam socks you with estate taxes.
Careful estate planning can help make the tax burden, and the paperwork burden, a bit lighter. Some people choose to utilize a concept called a “life estate.” In this case, the owner of a property can deed that property to another person and then continue to utilize owners’ rights up to his or her death. At that point, the property reverts automatically to the person holding the deed. The “life tenant,” or original owner, enjoys all the rights of an owner, including such things mineral rights, until death. The only right he or she forgoes is the right to sell the property.
The life estate is utilized at times to ensure that the intended heir gets the property, to avoid probate, or to ensure that an ancestral home remains in the family (passing property on to children, but allowing a surviving spouse to live there). Like any action fraught with legalese, it can be difficult to understand and difficult to conduct correctly without the advice of a good lawyer.
However, if you’re the fortunate recipient of a life estate deed, you’ve got additional options for help. Maybe you’ve inherited family property with leased mineral rights. What this means is that an oil or gas company shares a royalty percentage of any production from the land. The former owner of the property (your rich, now-favorite uncle, perhaps) enjoyed the royalties from those rights during his or her lifetime. Now you’d like to do so, too.
Many Royalty companies buys mineral interests, however, not the land itself. The process includes the simplification of all the paperwork for your life estate so that you can enjoy the benefits as soon as possible and reduce the taxes as much as possible. Subsequently, a royalty company converts royalty interest to cash quickly and efficiently, allowing you time to mourn your dearly departed uncle without worrying as much about Uncle Sam.