I inherited some non-participating mineral rights in Texas from a distant relative. I have been able to get on pay lists and receive payments from TX Unclaimed Property and producers by providing proof of heirship - wills.
What steps should I take to pass these rights on to my heirs with the minimum hassle and cost? Is there a way to do a “transfer on death” to avoid probate?
We have chosen a Living Trust to hold a majority of our assets as well as mineral interests. I established a separate EIN for the Trust since the death of a spouse can potentially create some issues with Purchasers. Tax reporting is still performed on your personal tax return. A successor trustee can issue a MD to the subsequent beneficiaries. As long as you title, issue MD to the Trust, the properties into the Trust, you will be able to avoid probate for these assets. Make sure to work with an attorney that specializes in estate planning to minimize risk.
Give some thoughts on the distribution of the assets. A percentage distribution to multiple heirs may seem the best and most fair, but it can also create administrative problems.
To answer your question. Texas has “lady Bird” deeds which are transfer on death deeds. They are not complicated. But, if one doesn’t do it correctly, it won’t work upon the grantor’s death, and interest would be subject to an estate proceeding. What I can’t tell from your question is how many interests you have.
You should consult a lawyer on this. The cost shouldn’t be great.
A Living Trust prepared properly by an estate planning attorney avoids probate in Texas.
Since the mineral rights I have are currently being paid on the basis of providing proof of heirship from a distant relative’s mineral deeds, do I have to obtain a mineral deed in my name before setting these up to pass to my heir by “lady bird” or trust? If so, what do I request from an attorney? Does the attorney have to be a Texas attorney (where mineral rights are)? What should one expect the cost to be?
Visit with a Texas attorney about the requirements. Generally speaking, title to interests in land and minerals is determined by reviewing documents of record filed with the county land records. The county does not issue deeds, if you are “in title” you should be able to proceed.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship.
Unfortunately, people confuse getting “On Pay” as having satisfied chain of title requirements. Many mineral owners unknowingly create title issues for future generations due to not being fully aware of the need to establish a proper chain of title. This comes in many fashions from improper legal descriptions to failing to complete transition documentation. If you are not familiar with how to prepare a Mineral Deed, then you should have an attorney that practices within this area to prepare the deeds. Be sure this is within their area of practice since I have seen many attorneys that prepare deeds with improper (I am being polite) legal descriptions that will require future curative work.
If there has not been a probate of the Estate, then speak with an attorney licensed in TX to discuss what issues may occur in the future. Send the attorney a copy of the will and a detailed list of the properties prior to any meeting. This will allow them to provide better advice and cost estimates. Depending on the complexity, The initial review of documents and consultation should cost anywhere from $200-$500.
You of course have to balance the economics of the values of the properties to the costs of any required curative actions. Professionals assess in this manner all the time.
A lady bird deed and a transfer on death deeds are two different types of deeds in Texas.
The value of the interest and how many persons you want to inherit will determine which option is best for your situation. If you have a revocable trust, these interests could be conveyed to the current trustee, and they would be disposed of in the same manner as your other assets at death. A transfer on death deed could work if done properly, which is difficult if you have a number of beneficiaries and want certain contingencies to apply. For interests with significant value, an LLC could be formed to own the assets and then your estate plan would dispose of your membership interests, which could be held as part of your revocable trust.
My relative has filled out Division Orders for her mineral interests She put her children’s names on them, Is that enough to transfer ownership or should it be in a will or trust?
No. Title transfers via a Mineral Deed. She will need professional help to prepare the deed properly so that it transfers by her intent (Joint Tenancy or at Death as an example). She can then file the deed with the County and provide a recorded copy to the operator/purchaser.
Explain to your relative that minerals are real property, just like a house. It requires a deed or probate or similar legal document be filed in county deed records to transfer title. Just as you sign a deed at closing to buy or sell a house. Even to give a house to your children, you need to file a deed. It is a public record to the world that real property, whether surface or minerals, now belong to someone else. This is why you cannot just donate without a record, like giving away toys or personal items.
I am fully aware of that. The question that min4me asked was whether a Transfer on Death Deed (aka a Lady Bird deed in Texas) would work.
From my perspective, I am trying to assess the best and cheapest way of insuring a singular heir will receive the mineral benefits I have been receiving upon my death.
Based on personal experience, my heir would have to pay to have my will probated in OK (even though all other assets will pass without probate), then file an exemplified copy of that will in the appropriate TX counties and contact the appropriate producers to change their pay list.
Since the royalty deeds are currently in the name of the person I inherited rights from and are from the early 1950s, I believe that I could not apply a “transfer of death” or lady bird deed ( I have no understanding of the differences of these) to the existing royalty deeds. Correct?
Can a TX attorney create a current deed on non participating interests in my name with a transfer on death clause under these circumstances. If I then passed, and my death certificate were presented, would the ownership properly transfer without additional fees such as the probating of the will in OK?
If this can be done, must it be done for each royalty deed separately?
You may take two positions, fix the title issues now so you can transfer the interest without question or leave it for your heir to perform that work after your death. You can create deeds today of any nature, but that does not resolve the break in the tittle. Resolving this break is going to most likely require a legal proceeding. I can understand the desire to not want to pay for legal services, but you have an issue that will be resolved eventually. The choice is do you resolve it now or when you are forced to resolve it. Revenue suspension will part of your risk management.
Why are you assuming I am not willing to pay legal fees? I paid legal fees to have wills prepared and probated.
There is probate in TX from the ancestor to my wife and probate in OK from my wife to me which is also filed in TX.
What constitutes a break in title? Under what circumstances would revenue be suspended?
Does one hire a landman or an attorney to remedy a break in title?
What does one ask for when hiring a person to remedy a break in title?
Please look at your thread on this topic and you will see why I would draw that conclusion on legal fees. A break in title occurs when there is not clear documentation in the title progression. An example, a stranger to the title leases a mineral interest; although, the stranger is an heir there is no title document of record in the County to support the execution of the OGL. This provides a break in the record title. The stranger may have a probate from another State that the Lessee relies upon for the OGL and may elect to wait to clear title until production is established.
In your case I would find an experienced attorney that practices within this area, provide them documentation, and allow them to present a plan to perfect title issues and accomplish your goal of a simple path to pass on your interests to an heir. You may want to discuss with an estate attorney as to the merits of establishing a Living Trust for these interests.
tim_dowd
The royalty deeds in question are in the name of an ancestor of my wife and the properties are located in Texas. The will of that relative was probated in Texas in Colin county. My wife was an heir of that ancestor and left all to me when she died. Her will was probated in OK and an exemplified copy filed in TX in the appropriate counties along with a copy of the ancestors will that clearly states both her maiden name in which the properties were held and the name at time of death. This information was deemed adequate to prove heirship for the release of funds by TX Unclaimed Property and to be placed on pay lists of 2 producers in 2 different counties. We were advised by an OK attorney there was no need to probate the will of the ancestor in OK. So, why would the lack of OK probate for that ancestor constitute a break in title?