One of the most common questions is should you sell mineral rights. If you check a lot of mineral rights forums people will commonly tell you to “never sell”. That’s bad advice. There are a lot of reasons why people decide to sell mineral rights. The question of should you sell mineral rights is really a personal question. Only you can answer it. However, we can help guide you through the important things you should take into consideration when deciding whether you should sell mineral rights.
Typical reasons people sell mineral rights
When deciding whether you should sell mineral rights it’s helpful to know why other people choose to sell. These are common situations that people are in when they decide to sell mineral rights. Perhaps you are in the same boat!
- Retirement: If you are nearing retirement age or currently retired, you may decide to sell mineral rights. If your mineral rights are producing royalties each month, you may want to get a fixed amount for them now so that you know exactly what they are worth. If you have non-producing mineral rights, you could end up holding them forever and never lease them or have any production start. A lot of people choose to sell mineral rights at retirement because they can get something for them now by selling rather than holding them for years hoping for something.
- Estate Planning: A lot of people decide to sell mineral rights for estate planning purposes. Should you sell mineral rights for estate planning reasons? For most people the answer is yes. Mineral rights create a complicated estate for many people. You are further dividing a sometimes already small interest making it worth less. You are also giving the burden of accounting for taxes on royalties and the eventual sale of the property. By selling mineral rights now you can make estate planning easier.
- Need Cash: Many people end up in a situation where they need immediate cash. If that describes you it might make sense to sell mineral rights. Don’t be deterred from selling mineral rights if having the cash now is important. When you sell you might be giving up some future value but you never know how long it might take. There are a lot of people that hold onto their mineral rights for literally decades and it ends up being worth less than hoped or nothing at all. Getting the money now if you need it is not a bad thing.
- Inconsistent Royalty Income: Tired of seeing your royalty checks bounce all over the place each month? The oil and gas royalties value can be tough to peg down. You might get $100 one month and $250 the next. A lot of royalty owners decide to sell mineral rights so they have a fixed amount of cash and know exactly what it’s worth.
- Divorce: Determining the value of mineral rights is nearly impossible until you sell. People sell mineral rights due to divorce frequently. It allows both parties to simply divide the cash from the sale rather than guessing at the value.
- Social Security/Medicaid Payments: Did you know that you might need to sell mineral rights to qualify for medicaid? You may also need to sell mineral rights to qualify for welfare or social security. Should you sell mineral rights to qualify for medicaid? For a lot of people that answer is yes.
- Waiting Game: Many mineral owners make the mistake waiting literally decades before they sell mineral rights. They end up selling in the end when they could have used that cash earlier. There is no guarantee that even a leased property will be drilled and turn into royalties. There’s also no guarantee that it will be worth more once that happens. Don’t end up waiting 20+ years for something to happen on your property just hoping it works out if you could use that cash for other things now.
- Home Renovation: Many people sell mineral rights to finance a home remodel. By selling mineral rights you can improve your home which increases that value. This puts the value of your mineral rights to work by improving property value and allowing you to benefit from your mineral rights.
- Business Investment: A lot of mineral owners want to invest in their current business, start a business, or invest in a business venture. You can sell mineral rights to finance a business investment and many people choose to do this. Putting that cash to work in a business can make a lot more sense than holding mineral rights and hoping for the best.
- Diversification of assets: A lot of mineral owners who have a significant ownership in mineral rights (above 100K of value) choose to sell to diversify. If you have a huge amount of your net worth tied up in mineral rights you have very little liquidity. Selling mineral rights is not a 24 hour process. Many mineral owners sell mineral rights to give themselves the ability to put cash to work other places that gives them more diversification and liquidity.
Should you sell mineral rights?
Every situation is unique. We’ve covered the majority of reasons people sell mineral rights above but your situation is personal. We talk with mineral owners all the time about their unique situation. If you are on the fence about whether you should sell mineral rights we can help. Simply fill out the form below and we will get in touch with you. The more information you can provide the better as it allows us to further understand how we can help you.
