Mineral Rights, Royalties & Inheritance

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Mineral rights may be diluted percentages, as property has been passed through many generations.
Mineral rights may be diluted percentages, as property has been passed through many generations. (Image: Hemera Technologies/AbleStock.com/Getty Images)

Mineral rights are property assets that can be inherited. Mineral rights entitle the holder to develop and produce commodities such as oil, gas and iron that are associated with the rights. The profits generated from development are distributed as royalty payments to the rights holders. You may be notified during the probate process of the deceased that you inherited sole ownership of specific mineral rights; however, often, mineral rights have been lost or diluted through many generations of inheritance, creating confusion and management burdens.

Mineral Rights Inheritance

Educating yourself is the first step to take when you inherit mineral rights. You should know that mineral rights can be and often are separate from surface property rights. If mineral rights have been separated, you do not inherit the land, only access to develop the mineral rights.

If the mineral right inheritance was specified in a will, then the executor is responsible for signing the transfer deed and filing it with the county clerk's office, transferring ownership along with any associated royalties. However, sometimes inheritance is conveyed through an oil company representative.

Dilution

If the mineral rights are still attached to the surface property, dilution may be a problem. As property passes from generation to generation, property shares can be divided. For example, one generation of four children inherits 25 percent, respectively. Each of these children has two children who then inherit 12.5 percent. The percentage of inheritance is directly related to the royalty percentage payment.

Lost Rights

Mineral rights may have been lost as people moved from rural areas, the location of most mineral resources, to urban areas. It is important to remember that even if inheritors have been difficult to locate, mineral rights may still belong to their heirs. To identify rightful ownership, a mineral deed record search in the county clerk's office is imperative.

Royalties

Any royalties associated with the mineral rights are inherited along with the rights. An oil company landman may contact you and confuse the matter by getting you to sign lease papers before you have had a chance to understand any implications of your inheritance. Do not sign anything without getting legal advice from an objective attorney.

The most important piece of information is the transfer deed, which demonstrates ownership. Only the rightful owner can sell or lease rights and negotiate royalty payments and percentages. In some cases, mineral rights have already been leased before inherited. As such, the inheritor is entitled to royalty payments as long as the transfer deed has been properly recorded.

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