What is the best way to transfer mineral rights upon death? In a will or through a trust?
I am 71 and my sister is 68. We were gifted via transfer, by our mother, prior to her passing in 2008, many mineral rights in OK and a couple in TX. It was deemed that the aggregate value of all real property and mineral rights holdings to each of us was exempt from taxation because the aggregate value was less than one million dollars per child. Neither my sister or I have any offspring.
I subsequently sold most of my mineral rights holdings in OK except for some smalls and 16 NMAs in Grady County and 2 small holdings in TX.
She has kept all of her mineral rights holdings, and is now re-doing her will. She plans to leave this all to me if she precedes me in death. If I precede her I leave her what I still have.
She is uncertain as to what she would do if I precede her in death. We have 3 other families that also have identical holdings and have set up trusts for their grandchildren. She is thinking she would leave everything to one of the 3 families, only.
They would have no idea or ability to handle this entire if their Father/ Grandfather has passed.
Having had to go through a probate of our Mother’s will in OK and may other issues, I am wondering if it makes sense to put all of this in some form of a trust or similar vehicle.
We have previously utilized the services of a very good (expensive) attorney in Chickesha.
you should contact an attorney regarding the specifics of your family and your holdings. But, as a very general rule, without knowing much about you or your family, a trust would probably be preferable.
My dad died in 2016 and his living trust made it no issue to transfer the mineral rights and bus little farm. No legal complications. Transferring county title to three siblings was not too complicated either.
A simple trust sounds like a possible solution. However, you should visit with an attorney because there are many variables that may need to be considered. In addition to leaving the property to another at death, it is also important to have powers of attorney in place so that a trusted individual can manage your property if you become unable to manage them.
My attorney drafted a transfer-on-death deed that I signed. That removes the property from probate and seems much simpler than either of the alternatives you have suggested.
If TOD deed left property outright to the beneficiaries or beneficiary, that is simple and will avoid probate, but it does not provide the beneficiary with creditor protection or protection in the event of divorce, which are important to many parents who leave an inheritance. If goal is to keep property in bloodline, trust planning can accomplish that result as well as provide creditor and divorce protection.
There I times when I recommend a transfer on death deed and times that I do not. sclausen noted some issues with the TOD approach. Also, in Oklahoma it may not be suitable when multiple beneficiaries are intended. If a beneficiary predeceases to the owner, then that beneficiary’s gift lapses. Title 58 O.S. 1255(b) states:
“B. If one or more of the grantee beneficiaries dies prior to the death of the grantor owner, the transfer to those beneficiaries who predecease the grantor owner shall lapse. …”
In other words, the deceased beneficiary’s children are disinherited.
A TOD is very simple, but it may have unintended consequences. That is why consulting an attorney is vital. This forum is great for getting information to discuss with professionals.
Agreed. But not every testator needs that expense or additional paperwork. I am merely suggesting a third simpler alternative if the situation is appropriate for it.
Thank you Diane, That is a very interesting approach. I would like to know more. Would this approach negate the 1 million dollar gift exemption, or would it supercede it and/ or make it unnecessary? There would also be financial instrument and retirement funds and real property involved in the process - sum would not exceed $1million.
Hal:
I don’t believe that a TOD would trigger any gift tax liability since the “gift” is incomplete and can be revoked prior to death. Similar to Will, a TOD doesn’t do anything until somebody dies. I believe that the individual would also receive a “stepped up” valuation for capital gains purposes. That is if congress doesn’t tinker with it this.
There are no gift tax consequences regarding a TOD deed because it revocable during life of grantor. At death it transfers property to beneficiary and under current law beneficiary receives a new fair market value basis, which may either be a step-up or step-down from the donor’s basis. The current federal estate and gift tax exemption is $11,700,000.