Landowners: Make Lease Payments You Receive Tax-Free

MDN ran across a story in the local Zanesville, Ohio newspaper that makes an interesting boast. A group of three financial advice firms have joined forces to offer workshops for landowners in the Coshocton, OH area that supposedly instructs landowners on how to save “virtually every tax dollar” on lease bonus payments. The technique, which involves setting up some sort of special legal structure, will also “save taxes” on royalty payments. We are 100% in favor of landowners keeping their money!

But, is it too good to be true? We don’t know. However, it does sound interesting, and if you live somewhere in the Coshocton vicinity, we’d encourage you to check it out. Let us know if you do…

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Tips for Estate Planning for Landowners with Leases

The shale drilling boom in the Marcellus and Utica Shale region is one of the best things to happen for trust and estate lawyers in years. Landowners need help in planning how they will pass on royalty income from their property to avoid a huge tax hit in the process. Greedy politicians are always looking for a way to relieve citizens of wealth, to, you know, spread it a round a little bit. Landowners who have signed leases need a plan to reduce the government’s bite as much as possible.

However, simply giving away the royalty rights early in the process, to help you and your heirs, is not always the first and best option, according to experts like attorney R. Douglas DeNardo—a partner at Rothman Gordon in Pittsburgh, chairman of the firm’s estates, trusts and taxation department:

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Caution: Royalty Buyers Coming Out of the Woodwork in Ohio

A tale of caution for landowners in Ohio and in other areas where landowners have recently signed leases to allow drilling for shale gas. One landowner in Ohio reports being called by a Texas company looking to buy his royalty rights. The landowner already signed a lease and got his signing bonus. The company in question wants to now purchase the man’s future royalty payments—at a discount of course.

This is similar to companies buying other structured settlements—like someone who successfully sues for damages from an accident, but the payments are made over the course of several years. Or someone who wins a state lottery that has a payout over 25 years. Companies will offer to pay you less than what you would make over the course of time, but you get a lump sum payment now, up front.

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Money Problems for Landowners with Marcellus Shale Lease & Royalty Payments

The new wealth that leasing and drilling in the Marcellus Shale brings on, can also bring on a new set of challenges for landowners, many of whom are farmers who have struggled to pay the bills for years.

A case in point are the issues faced when there are multiple owners of a family farm, as told by Stuart “Buzz” Hutchison, an estate and trust attorney:

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