Dear Michael: When the big oil rush was on, we thought our minerals were going to be worth something. However, we haven't heard anything and our minerals haven't been leased by anyone. In the meantime, we put the minerals into an irrevocable trust. Our son has taken over the family farm and my dad always wanted the minerals to stay with the place. If nothing happens with our minerals, how do we get them back with the land someday? – Irrevocably Rushed.
Dear Rushed: Many people made the same mistake when they thought all of western North Dakota, eastern Montana and parts of South Dakota were going to be part of the big oil boom. Many people panicked and put their minerals into an irrevocable trust without any forethought of what would happen if no one leased the minerals or if they did lease them, but the income didn't sustain itself.
Of course, most attorneys advised a standard type of irrevocable mineral trust to put the minerals into. One of the questions your attorney likely asked you was how long you wanted the minerals to stay in the trust. Many people, hoping and believing they'd have income for generations stated they wanted it in there as long as they could.
Unfortunately, the longest period you can leave anything in an irrevocable trust is twenty-one years past the last living beneficiary's death. In other words, by the time you die, if you have great-grandchildren born, it could be their lifetime plus twenty-one years – or another hundred years or so.
Over the last few years, I've learned it's better to follow the states example for reclaiming minerals rights on dormant minerals. Instead of putting the minerals in forever and ever, the grantees should state in their trust they want the minerals to stay in trust 'unless there is no activity on the minerals for a period of twenty years. If there is no activity for this period of time, then the minerals shall be returned to the landowner, if it is a family member, or given to all of the family members if the land is no longer owned by a family member'.
By doing this, you won't have your minerals tied up for the next hundred years or so – even if there is no activity.
For those who already put their minerals into trust, you have two choices.
One, you can go through the process of undoing the 'irrevocable trust' – meaning you'd have to have the grantors (you) and all the grantees (all of your children, grandchildren, etc.) sign they would like to have the trust dissolved. This, then, is taken before a federal judge – not a city, county or state judge – a federal judge – to have the judge declare the trust is not what you wanted it to be, and is not in the best interest of all of the beneficiaries. This might sound common sense to you, but a judge does have to weight all the possible outcomes of these minerals for this generation and generations to come, and might rule against the dissolution of the trust. You never know.
Secondly, you can follow the state laws on abandoned or dormant minerals and wait the twenty years and have the landowner file for ownership of the minerals. You have to post a notice in the county newspaper informing everyone of your intent to claim the minerals and, as long as none of the beneficiaries of the trust step forward, it's possible your son will be able to reclaim the mineral rights with the land – if there's been no activity for twenty years and if none of the beneficiaries comes forward to say they won't give up their rights.
Estate planning is an art form. In every estate plan, you have to look at what you are putting into your plan and how things will work out if things go well, or if they don't go well, or if they should go terrible.
You don't want to put something into your plan that freezes assets in place forever and ever (such as an irrevocable trust) with no 'outs' on how your beneficiaries can deal with changing circumstances in the future.
Always set up your plans so that your farming son wants to take over the farm, make it possible. If you want to leave other assets to your non-farming children, make certain it's guaranteed they'll receive these assets. Don't just 'by guess and by golly' your estate plan – set it in concrete.
But then do the backside planning as well – such as what happens if your son doesn't want to farm by the time of your second death? What happens if he has died before you do or dies shortly (within ten years) of your second death? Do you want these farm or other assets you've set aside for non-farming heirs then going down to your daughter-in-law or son-in-law? Plan for the best – but put back-up plans in for what happens if things go to the worse.