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Trust, Estate, and Setting Basis - When managing a trust or estate, count on Turrett to provide the proper asset value.

Trust, Estate, and Setting Basis Appraisal and Valuation

Turrett provides trust and estate appraisal and valuation for oil and gas assignments.  Appraisals are also performed for setting the basis in the event that a basis was not set for an estate or in probate.  Appraisals for trusts and estates typically take the form of either a family mineral holding or interests in oil and gas companies.

We perform oil and gas appraisals for trusts and estates to support our clients' needs when completing:

  • Setting the IRS tax basis for minerals inherited and then sold

  • IRS Forms 706 and/or 709 support

  • Marital asset valuation

  • Family asset recording

Appraisal or valuation of oil and gas mineral interests are performed via a review of the mineral ownership through mineral deeds and lease documents.  We then review past production and payments by reviewing the payment statements or stubs that have been received by the mineral owner.  Our analysis of cash flow, comparable sales, and sometimes replacement costs leads us to a market value as of a specified date.

 

For oil and gas company interests we review the type of ownership that is held in the oil and gas company and the assets and liabilities of the company.  Through careful cash flow analysis and comparable sales, we arrive at the fair market value of the assets.

 

Services we perform include:

  • Valuation of proved oil and gas assets

  • Valuation of contingent and prospective resources

  • Valuation of oil field equipment

  • Valuation of an oil and gas company

 

The terms oil and gas appraisal and mineral appraisal are used commonly to refer to the valuation or appraisal of minerals underlying the surface.  Mineral appraisals may include oil and natural gas, which is the most common, or other less common minerals.

Appraisal of oil and gas and the valuation of oil and gas are differing types of assignments.  Appraisals are necessary when they are specifically requested or are required by law or regulation.  Appraisals of oil and gas require that the performance of the assignment is balanced and there is no advocating for the client.  The oil and gas appraisal assignment results are an unbiased, neutral opinion of value.

Valuation of oil and gas has a wider scope of work that allows for valuation of oil and gas based on any given criteria.  Valuation, for example, can be biased in the client’s interest to arrive at a starting point to negotiate a sales price.  There is more flexibility in performing valuation assignments for oil and gas assets.

 

To prepare an oil and gas appraisal or valuation, Turrett will need to evaluate the property and begin with a standard list of questions.

 

Identify the key features of the assignment:

 

  • Who are the client and intended users?

  • What is the purpose of the assignment?  What type of valuation or appraisal is needed?

  • What is the effective date of the opinion of value?

  • What are the particulars of the assignment? Township, Section, and Range.  Producing or non-producing.  Type of interest – Working, non-working, royalty, override.  Interest percentage, other material particulars.

  • Will there be a requirement for Extraordinary Assumptions or Hypothetical Conditions?  Do data that cannot be obtained require an Extraordinary Assumption?  Are there hypothetical cases that need to be run for the client’s needs?

 

Scope of Work

Based on the outcome of the above features of the oil and gas appraisal or valuation assignment, Turrett will prepare an appropriate scope of work.  Turrett will share the prepared scope of work with the Client and present the final version that has been agreed upon in the form of a letter proposal along with the standard form of the contract.