CLEVELAND Its a problem wed all like to have. Youre a rural landowner in Ohio, living your life and paying your bills, when a landman offers you a small fortune for your underground mineral rights ... plus the possibility of even more money in future oil and gas royalties.
Thousands of property owners in eastern Ohio are now what some call shale-ionaires and many have the ironic problem of ensuring their new wealth is a blessing and not a curse.
Many people, even those who had large land assets before, are now cash rich, says Attorney Scott Swartz of the Business Succession Planning and Wealth Management practice of Benesch, Friedlander, Coplan & Aronoff LLP in Cleveland. They have never had to confront the issues they face now. Wealth of this scale requires a completely different level of financial and legal sophistication, and many landowners simply dont have the experience to cope with their new reality.
Swartz, who also has experience as a certified public accountant, says attorneys with financial backgrounds have the ability to anticipate and avoid common problems leasing landowners face. In some cases, the attorney can act as a referee between multiple family members who own a common plot of land under lease.
There needs to be a management structure in place so everyone benefits and they can all avoid the grief that comes with family infighting, Swartz says. There are also issues with saving new wealth from unnecessary taxation.
Many people dont know the difference between capital gains taxes and income taxes. This means some landowners, without professional help, could pay twice the taxes they are legally required to, says Swartz.
Other common legal needs include establishing trusts for children and giving money to family members in a way that is both legal and avoids extra tax penalties. Whatever the specific need, Swartz warns that timing is crucial.
The time to see a qualified attorney is before you sign an oil and gas lease or sale of mineral rights. There needs to be a plan in place that helps the landowner achieve his or her financial goals, and that may require modifications to the agreements. Before a signature, there are options but after a lease is signed, the list of options gets much shorter.
Its not all worry and guardedness for Ohios new shaleionaires. Swartz says the state has created a tax break they, and other Ohioans with assets, can enjoy easily, the elimination of the estate tax. Up until now, Ohio has enforced a very low threshold for paying inheritance tax. Beneficiaries owed a tax of up to 7 percent on any money over $388,888. Ohio House Bill 153, signed by Ohio Gov. John Kasich in June of last year, repeals the entire estate tax on December 31 of this year. Swartz says many people dont know this because, while the Ohio General Assembly quietly dispatched the estate tax, the publics focus was on other matters of public law, such as Ohio Senate Bill 5 the controversial law governing public union employees that voters defeated in a referendum last November.
The elimination of Ohios estate tax is a big advantage for Ohio landowners with oil and gas proceeds. It could tip the balance to encourage them to stay in their home state, near family, instead of moving to a more tax friendly state so they can pass on their good fortune to their children, said Swartz.
Benesch, Friedlander, Coplan & Aronoff, LLP was established in Cleveland in 1938. Benesch is a full-service business law firm with offices in Cleveland, Columbus, Indianapolis, Philadelphia, White Plains, Wilmington and Shanghai. The Shale Oil and Gas Team practice co-chairs are Orla E. Chip Collier III (Columbus office) and Kevin D. Margolis (Cleveland office).
Learn more about Benesch by visiting www.beneschlaw.com.
Attorney Scott Swartz can be reached by calling (216) 363-4154, or emailing email@example.com.