James and Linda owned a 250-acre ranch when they retired and moved to a retirement community. The ranch had valuable subsurface mineral rights. James and Linda had been approached several times about entering into a mineral lease that would allow for the production of oil and gas.
James: We were surprised that so many companies showed interest in our land. We were shocked when we found out what the ranch was worth. We thought the ranch was worth around $500,000, but when we had it appraised, we were told it was worth $5 million because of the mineral rights.
Linda: We considered signing a mineral lease but had concerns about how the extra income from the royalties would affect our taxes.
James and Linda contacted their favorite charity to inquire about making a charitable gift of their land. They learned they could transfer the property to fund a special type of charitable remainder trust and control the income they received each year.
Linda: I was delighted to learn that we would receive a very large charitable deduction. In addition, the transfer would be tax-free and the income from the trust would be taxed in a more favorable way.
James: We decided to transfer the ranch to a trust. The trust entered into a mineral lease and the trust earns royalties from the lease each year. The trust pays us all of the income and will for the rest of our lives. After that, the remaining assets of the trust will go to fund the causes most important to us.
Is a gift of mineral interests right for you?
Mineral interests can make a wonderful gift to charity. If you own mineral interests and are interested in learning more about your charitable planning options, please contact us
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