Helping Banks To Manage Mineral Land Trusts

Banks frequently manage large privately owned mineral land trust accounts for estate heirs. The bank has a fiduciary obligation to follow the “Prudent Man Rule”, which requires that trust properties be managed at least as well as a prudent and knowledgeable owner could. However, banks may not have internal staff proficient at mineral property values, lease contracts, royalties, mining practices, etc. This is an opportunity for experienced geologic consultants and certified minerals appraisers to provide needed help. Items valuable to Trust managers may include: 1. Marketing privately owned mineral trust lands to mining or oil & gas firms, assuring competitive offering prices and terms; 2. Negotiating favorable new mineral lease and purchase-option contracts; 3. Monitoring progress of mining, royalty payments, land reclamation, and environmental clean-up work; 4. Balancing future mining income with later industrial, commercial or housing development, timber harvest, etc.; 5. Assuring that Depletion Allowance tax advantage is taken for actual mine royalty payments, but not for annual non-mining lease (rental) income; 6. Appraising in-ground mineral value for bank audits, estate tax valuations, and equitable property division between heirs; and 7. Serving as expert witness, representing the legal interests of the bank, trusts, and the mineral heirs in litigation. Banks do welcome reliable advice which assists them in achieving the “Prudent Man Rule” and improving mineral income to their land Trust accounts.