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Mineral Ownership Question: I own some minerals and am wondering

Mineral Ownership Question: I own some...
Mineral Ownership Question:
I own some minerals and am wondering if there is any reason to place them into an LLC, LP, Trust etc. in order to protect them/myself from liability?

I own a mineral estate which is currently under the name of my LLC which I use for independent contract work. I want to move them out from under the name of my work LLC in case I ever get sued form my independent contracting work. I am wondering if there is a good reason to place them in a new LLC, LP, trust etc. I know that there can be estate planning reasons for doing so to help with taxes, but as these minerals + all of my assets are much less than the $5.25 million exemption amount, I don't think there is a reason right now to do so for tax reasons. Therefore, I'm primarily concerned if there is a reason to have them in such an entity so that I/the minerals are protected from liability? Or should I just put them into my name individually because there is no benefit to forming a new entity for this purpose?

I thank you in advance for clearing this up.
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Answered in 9 minutes by:
4/18/2013
Richard
Richard, Attorney
Category: Estate Law
Satisfied Customers: 55,870
Experience: 29 years of experience practicing law, including tax and estate planning.
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Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. Unless you are planning on actively developing the mineral interests, you really need not go through the trouble of forming a new entity to hold the ownership. You can put them in your name personally without any undue risk. If you are otherwise in a line of work that would expose your assets to the risk of a lawsuit, then you might want to put all your non-exempt assets (retirement income and retirement account assets are exempt and can be left in place as can your principal residence because Texas has an unlimited homestead exemption) into a family limited partnership. Carefully drafted, this converts assets that a creditor would find attractive to go after into a limited partnership interest with no control, no rights other than that of an assignment, no transferability, no marketability, and no right to distributions. The transfer is for fair market value…i.e., you are simply exchanging one asset for another of equal value to you. And, you maintain control through a general partnership interest that you control. Yet, when complete it essentially is an asset no one wants and thus the creditor is less likely to pursue the debtor. Family limited partnerships must be carefully drafted and one would need an attorney experience in this area to do so, but they can be a very effective method of asset protection. But, unless you otherwise have lawsuit or creditor exposure, there is no reason to do this for purposes of protecting yourself from liability relating to owning mineral interests.




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Richard
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Category: Estate Law
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Experience: 29 years of experience practicing law, including tax and estate planning.
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