I have received Division Orders and W-9s to fill out from several operators. I inherited some leases from my mother and my brothers and I are splitting them up. I want to put the leases in my family trust, but am not sure what to put on the “Name” line on the W-9. Do I put the name of the trust (this is what I believe) or just my name?
Generally, the division order name the person or entity holding legal title to the minerals and the W-9 uses the same name and tax identification number. It is my understanding that there is an exception for a single-member LLC which will have W-9 in name and social security number of individual owner. Have you made a legal assignment to the family trust and does it have an EIN and do you file tax returns for the trust? Are you talking about minerals under and oil and gas lease or are these working interests which your parents held as a lessee? You should consult an oil and gas lawyer about title and your CPA about the W-9 form.
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Thanks for your reply. I will address your questions below.
“Have you made a legal assignment to the family trust and does it have an EIN and do you file tax returns for the trust?” - The trust does not have a separate EIN. I am not entirely sure what you mean by “made a legal assignment”, but I am guessing that I have not.
Are you talking about minerals under and oil and gas lease or are these working interests which your parents held as a lessee? - These leases came from my parents, grandparents, and aunt. It is a long convoluted story.
You need to put an Assignment or Mineral Deed of record that conveys the priories to you trust. It should be prepared by an oil and gas lawyer. After recording, a copy should be sent to the various operators who will issue new Division Orders.
Thank you very much.
I am taking it that if it is a family trust that it has its own tax id number. Might want to ensure whatever tax id number it has, that it is not just a family member’s. Believe you would have a problem.
fwiw, here’s my best guess about what you wrote: You wrote that you inherited some leases for which you received Division Orders, but I am conceptualizing that you mean that you inherited some mineral interests which had been leased by the previous (deceased) owners, and are now producing. If you as an individual are currently the owner of the mineral interests, then the Division Orders and the corresponding W-9 should be in your name with your ss number, I would think. If you fill out the forms and send them in, the operator can begin to pay royalties to you. I think from what you wrote that you want to transfer the ownership of the mineral interests into your trust, but the transfer has not yet been done. That might best be done with the help of either an estate planning attorney or an oil and gas attorney? A deed would be prepared and recorded in the County where the minerals are located. After the ownership of the minerals has been changed from your name to the name of your trust, then you provide the operator with a copy of the recorded deed. The operator would then probably send another Division Order to be executed by whoever has signing authority for the trust, and you would send that back to the operator with a W-9 that corresponds to the trust, e.g., with the EIN number of the trust. I’m not knowledgeable about the tax status of a living trust, so I am not sure about that particular detail. The operator would effectuate the change, probably effective with the approximate date that they receive the copy of the recorded instrument, or shortly thereafter, rather than retroactive to the date of the deed that conveyed into the trust; I’m not sure whether they have any way of effectuating it prior to the date of their receipt of the copy of the deed. From that point on, the royalties would paid to the trust.
I did pretty much the same thing a year or so ago. There was one additional step, though, that no one so far has mentioned in this discussion. The interests I inherited were in my name only, so our o&g attorney prepared two county-wide deeds for each county I knew I had an interest in. The first deeded my individual interests to a joint interest with my wife, and the second deeded the joint interest to our family trust. We also filed copies of the wills and probate orders for everyone in the path of the inheritance (my interests all came from my maternal grandfather, but at his death some went to my now-deceased grandmother and mother before coming to me, so I had three such packages to file in addition to the two deeds transferring ownership - this got expensive!).
For what it’s worth, my o&g attorney advised me that, at least for the time being, it wasn’t necessary to have new division orders and W-9’s prepared for the currently-producing wells - only for new wells and leases. He said that down the road, the operators and purchasers might want me to execute division orders for the existing ones, but there was no hurry on this.
As a side note, if you have more than one mineral interest, you might want to check with the county clerk in each county you need to file the wills and probate orders in. It may be that you can get away with only getting one certified copy of each of them, then sending them to each affected county in turn. It would be a slow process, as you would have to wait for the originals to be returned to you before you could send them to the next county, but it would save you money on certified copies. The deeds transferring your interest to the family trust are county-specific, though, so you wouldn’t be able to reuse those documents.
The usual disclaimer: I’m not an attorney and don’t pretend to be one. I’m just sharing my experience and what my attorney and some of the county clerks told me. As others have suggested, it would be worthwhile to hire an o&g attorney to help you with the process.
You may be able to avoid obtaining an EIN for the Trust.
In most revocable trusts, the settlor can continue to use the owner’s SSN without the need to obtain a EIN, at least as long as the settlor(s) are alive and if the Trust qualifies as a “grantor trust” for income and estate tax purposes in accordance with Code Sections 671-678. Your attorney should be able to direct you.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
The term living trust usually refers to a revocable trust created by the owner of the property transferred to the trust and so long as the grantor is a trustee or co-trustee no EIN is needed for the trust and all tax items are reported under the grantor’s SSN. On death of grantor, the trust becomes an administrative trust for tax purposes and needs its own EIN.
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I set up a revocable trust recently and began to move my producing/ non-producing minerals into it. I carefully read the instructions on the w9 and as i interpret them i simply put my name exactly as it appears on my tax return. The trust uses my ss#. I’ve now received new divison orders although some operators took over 2 months to process!! However 1 operator refuses unless I 1. Put the name of the trust on the w9 or 2. Put the word Trustee after my name. They wont budge and neither will I. I’ve read where name mismatches can cause problems with the IRS.
You need to get a response from your CPA who can best advise you as to the proper way to fill in the W-9 form for IRS rules. IRS instructions are not always clear. Assuming that the trust is a disregarded tax entity and you report all income on your personal tax return, perhaps you could enter your name on Line 1 as the taxpayer and enter the name of the trust on Line 2 as a disregarded entity name. Maybe enter XXX Trust, Joe R Trustee on Line 2.
Thanks TennisDaze. I will do that and send it in. I realize each operator has different policys and procedures. When I moved everything to my trust i was amazed at how some operators could turn out new divison orders in 24 hrs and some two months!
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