Oil and Gas

           One problem facing many mineral owners is how to pass property to loved ones without the time, expense and frustration of going through the probate court.  One solution is a simple “Oklahoma Mineral and Royalty Trust”.  Your oil and gas interests are owned by the Trust that you manage.  You lease, sell, buy just as before.  The income belongs to you.  While you are living there is not separate tax return. You choose who will receive the property once you pass.  The property is conveyed to your family or other beneficiaries without the intervention of the probate court.

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What you need to get started:

-List of legal descriptions (or deeds) of your properties.

-List of who you want to be in charge after you’re gone.

-List of the people or charities you want to inherit.

Features:

-Inexpensive to Set Up

-Simple to Manage, just like you do now

-Avoids Probate Court and Judges

-No Separate Tax Return (During Your Life)

-Private

-Revocable Terms

-Change Beneficiaries

-You Stay in Control (Sell or Lease Interests)

-You choose who manages and inherits

-Stepped-up Tax Basis

-Works with Leased or Un-leased Minerals

-Beneficiaries problems (divorce, bankruptcy, judgments, creditors) won’t impact your ownership

Also available for Mineral Owners who reside outside of Oklahoma.

If I have a Trust Do I Need to Transfer Oil and Gas Mineral Interests Into It?

If you have an existing trust, one of the keys is make sure that it is funded. In the case of oil and gas this means deeding that interest to the Trust or Trustee. The deed must be filed in the county where the minerals are located. It is also advisable to file another document that identifies the trust, the trustee and provides additional information. This is a memorandum certificate or affidavit of trust.

Mineral Interest Probate:

Often a property is inherited but title is not in the name of the heirs.  Generally, a company will require a probate before they begin paying royalties.  Or, a buyer will make probate a title requirement.  Very often, the process is simple for the heirs.  It is also rare that any heir is needed to make a court appearance or travel to Oklahoma.  Finally, many times a mineral only probate is eligible for a summary process which saves time and money. Start Online Probate Interview


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Lease Terms / Negotiation

The devil is in the detail in Oil and Gas leases.  It is important to bargain for the best deal because you can be bound by the contract for decades to come.

Pooling Orders:

Sample heading for an Oklahoma Commission Case.A pooling is a legal process that can force mineral owners to allow development of their minerals.  This is generally used for people who don’t sign a lease or cannot be found.  Fighting forced pooling can be expensive and often futile.  However, a mineral owner still has rights.  If a pooling order is allowed, an owner is given various options.  We explain the pros and cons of the choices offered.  There is typically a time sensitive choice to make.

Simple Probate Avoidance:

People who go through probate often want to save their family from that trouble.  Here are a few ways to avoid probate.

Transfer on Death Deed: 

This is a simple, inexpensive document where you name the person you want to receive your land or minerals after you are gone.  In the meantime, you maintain complete control.  You can lease or sell the property and don’t need anybody’s approval.  After death, the person(s) named files a form with your death certificate and receives the property.  There is no probate or court process.  This works even if you don’t have a Will.

Joint Tenancy:

Joint Tenancy creates an ownership interest in the property in equal shares.  When one joint tenant dies, the other files a form with a death certificate in order.  This removes the deceased person from the title.  However, unlike the Transfer on Death Deed, the person making the deed gives up an ownership interest.  It is generally used by spouses when purchasing a homestead.

Trust:

A trust avoids probate if the minerals (or other real property) is deeded into it. An owner can create a trust the preserves all of his or her rights.  It does not require any separate tax return.

Out of State Trusts:

Too often, out-of-state owners fail to transfer their minerals into their trust.  As a result, those assets become subject to probate.  Creating a mineral deed into a trust is considered the practice of law in Oklahoma. Therefore, an attorney not licensed in Oklahoma cannot prepare the deed.  We can assist in the preparation and filing of the needed forms.

  Frequently individuals on the Mineral Rights Forum have posts that involve issues concerning title or the transfer of ownership after death.  The purpose of this paper is to provide some information regarding issues and common questions.  This is not legal advice as your situation may require different actions.

Frequent Questions:

What is probate?

We had a probate in our home state;  why must we probate in Oklahoma?

What if there was a trust?

Why was the company willing to lease and pay a bonus but is now unwilling to pay royalties?

Why won’t the company accept an affidavit of heirship?

What does a probate cost?

What is Ancillary Probate?

What if there has never been a probate?

What is the difference between a Summary and Ancillary Probate?

Will I have to travel to Oklahoma?

How long is the process?

What about Estate Taxes?

What is probate?

As it relates to a person who stands to inherit property, it is a process by which title to property is transferred from the deceased owner to his or her heirs or according to a Will.

We had a probate in our home state;  why must we probate in Oklahoma?

Simply put, it has to do with jurisdiction.  A court of one state does not have authority over real property (including mineral interest) in another.  Therefore, a court outside of Oklahoma cannot award title.  Only an Oklahoma Court can do that.

What if there was a trust?

A trust avoids probate only if property is transferred to the trustee prior to death.  If an interest is titled in the name of the decedent, instead of a trust, then probate will be required.  Typically, those with trusts also create a will.  This will instructs the probate court to transfer assets to the trust.

Why was the company willing to lease and pay a bonus but is now unwilling to pay royalties?

It is not uncommon for a company to take certain risks in order to secure a lease because it provides it with valuable rights.  However, if there is production a “division order analyst” will examine the title to the property.  If there are defects, such as an unprobated estate, the analyst will place payment of royalties in suspense.  This means that the monies will be held until the title issue is resolved.

Why won’t the company accept an affidavit of heirship?

In Oklahoma, an affidavit of heirship must meet five criteria to be deemed to provide “marketable title”.[i]  The biggest hurdle is the requirements is that an affidavit must be on file for 10 years.   Therefore, it is usually best to go forward with a probate if royalties are in suspense.

What does a probate cost?

There are several components that make up the expenses related to a probate.  These are:

  • Filing fees
  • Publication Fees
  • Postage
  • Attorney fees
  • Recording fees

Often attorneys are willing to probate mineral interests on a flat fee basis.  That means the expenses listed above are rolled. Into one price.

What is Ancillary Probate?

Generally, this is available if there has already been a probate in another state.  It requires certain documents from the original court.  Once these are assembled, then the process is very quick.

What if there has never been a probate?

If there has not been a probate, generally a shortened “summary probate” procedure is used.  It is available if:

  • The decedent has been dead five or more years; or
  • The decedent lived outside Oklahoma at his or her death; or
  • The value of property within Oklahoma is valued at $200,000 or less.

What is the difference between a Summary and Ancillary Probate?

For the client, there is really no difference.  The summary probate requires a slightly longer timeframe and requires slightly different publication requirements.  In short, it is something that the attorney, as opposed to the client, handles.

Will I have to travel to Oklahoma?

While we would love to have you, the answer is no.  It is extremely rare that anybody other than the attorney need attend a hearing.  Paperwork can be handled through mail or email.

How long is the process?

Once the paperwork is signed and filed, the process can take as little as 30 days (for an ancillary probate) or about 75 days for a summary probate.  These estimates may vary depending upon court availability.

What about Estate Taxes?

Oklahoma abolished its estate tax beginning January 1, 2010.  For those who died prior to 2010, often a release can be obtained or the tax expired due to the lapse of time.

Federal estate taxes are rarely an issue since the taxable amount begins at relatively high levels.

[i] 17-O.S. §67(C) says:  . In order to establish marketable title pursuant to this section:

  1. The affidavit or recital must state that the decedent died without a will, or if the decedent had a will, that the will was never probated in Oklahoma and a copy of the will is attached to the affidavit or recital, or if the will was probated that the severed mineral interest was omitted from the final decree of the decedent and a copy of the will and final decree is attached to the affidavit or recital;
  1. The affidavit or recital must list the names of the decedent’s heirs and their relationship to the decedent;
  1. The affidavit or recital must state that the maker is related to the decedent or otherwise has personal knowledge of the facts stated therein;
  1. The affidavit or the title transaction that contains the recital must have been recorded for at least ten (10) years in the office of the county clerk in the county in which the real property is located; and
  1. During the ten-year period following the recording of the affidavit or the title transaction that contains the recital, no instrument inconsistent with the heirship alleged in the affidavit or recital was filed in the office of the county clerk in the county in which the real property is located.


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