Mineral rights in a family trust

Does anybody have prior experience in placing mineral rights into a trust? My siblings and I have just started the process and any tips would be appreciated.

Hi Allan,

I notice that no one ever replied to your question. I think it is a good one and I am interested in doing the same thing. I was wondering if you were able to complete the process and would be willing to share what you have found.

Regards.

Mike

I am also interested in this subject.

Mike Schenck said:

Hi Allan,

I notice that no one ever replied to your question. I think it is a good one and I am interested in doing the same thing. I was wondering if you were able to complete the process and would be willing to share what you have found.

Regards.

Mike

Good subject-- I think a family trust would make transfer of the royalties simple . You could just pass them on when you die. Correct me if I am wrong ,but the monies would go to the trust and the administrator would send the money to those named in the trust. We also are looking into a family trust with an attorney in N.D.

Yes, that is the thought. Especially helpful with shared mineral rights. Basically the trust (and trustees) would be responsible for distributing payments to beneficiaries. The producing companies would only be responsible for sending one check. Less opportunity for error, simplified tax structure, single signature for lease and other documents, etc.

As the royalties pass to successive generations, and presumably to a larger number of people, it becomes harder and harder to keep track of payments and percentages, leases, taxes, etc.

It would seem to be a no-brainer but there have to be some gotchas to look out for. I would really like to hear from someone who has done this.



James O'Donnell said:

Good subject-- I think a family trust would make transfer of the royalties simple . You could just pass them on when you die. Correct me if I am wrong ,but the monies would go to the trust and the administrator would send the money to those named in the trust. We also are looking into a family trust with an attorney in N.D.

Dear Allan,

I'm a Trust Baby, so Let me tell you from my point of view what you should do for your heirs.

My Granddad left his Oil and Gas to my Mom and her 4 brothers and sisters and that was in 59, when Trust departments of Banks were a service of the Bank. My Mom Died in 1978, and things past along to me.

My sister and I draw the income from the Trust mainly Oil and Gas Royalties from Grand Mother and Grand Father Property. We receive Checks every month of the year, except December when they pay the Taxes. WE as heirs have no control over the Bank or Trust Department. They raise their fees every year, we can do nothing about it. They take 6% off the top all on Royalties, and 3% off money Investments, and the investment since they go in and out in the same month, don't even make 1.7% yearly returns. Any non producing properties they charge $75 per property per month. Then on top of this they take a $4000 yearly fee. Now you would think that a million dollar Trust would pay a better return than $56,000 split two ways. Still figuring out where all the cash goes.

In the Trust there is My Grand Fathers Office from the 50's, a two story building that sits across the street from TCU University, and the Trust Dept has managed this building for 55 years, and they did not take very good care of it at all. So if you have property that you love, I suggest you sell it while its in it's prime and put the money in Trust. The Bank has continued to ask my sister and I to sell Surface acres we own. We have some 2000 surface acres that have been trying to sell. I just found out recently that we can't sell the Surface Acreage, because then we would lose or Minerals, because this is PSL Public School Lands and in order to split the Minerals with the State of Texas, we must manage the surface. The Trust did not know this.

So just make sure you make a good plan, brainstorm to make sure you cover the bases, will you want your kiddos to be able to get more out, if they need it. After being a Trust Baby for 20 years, I like to tell people that just give it to the kids, and if they blow it, at Least that had the chance. Stay away from Bank America Trust Department.

Also there is the Child Anti Trust Act, in which they take 28.5% out of each month to help the Trust Grow and go on into the future.

One of my Aunts died last year, leaving her stuff to her son and daughter, The Trust Department does not communicate well with heirs, I knew what to do when my Mom died, because I was raised in the town where the Trust is kept and aware of what to do. However my cousin was not, so he hired a attorney to start moving the Royalties over from Grand Dad's account to his. Oh, The Bank went Ballistic, because they were still accepting checks in my Grand fathers name and then splitting them up 6 ways. AFter they got wind of that Cousin, they split all the Division orders up so each one of us got checks in our names. Another thing, I have found several Royalty Checks for my grandmother on the State Unclaimed funds web site. Some how or another the Royalty checks didn't go to the bank, one $9000 Royalty check had been sitting there since 1979.

Just take your time and plan accordingly for your heirs. I would not want them to go through what we have for the last 20 years.

God Bless and Continued Success.

Chris Wilson

Hope this helps a little,

Sincerely,

Chris

I have dealt with a few banks as trustees for oil and gas minerals. Wells Fargo seemed better than the few others. I would recommend interviewing many and discussing fees. If you have a knowlegable family member to manage the oil and gas assets let them do it.

Chris , it sounds like the bank is abusing you. When the trust was first set up the bank might have been well intentioned but as time went by they have changed. I hear most banks have gone from making most of their money from loans to making most of their money from fees. I sympathize with you and thank you for relating your experience with a trust. I suppose there is nothing you can do to dissolve the trust or you would have done it already. I would rather my children blow every dime of what I leave them than to see a bank siphon off so much and mismanage the rest. RWK

Chris: Is the federal income tax rate for your trust 36 percent?

I have been doing the administrative work to transfer mineral assets in my client’s mother’s trust into the trusts of each of the 3 sisters, the heirs. The trusts were set up with attorneys, and not through any bank or institution. My client is the successor trustee of her mother’s trust. I created new mineral deeds for each county listing all properties within that property, and moving from the mother’s trust naming the 3 sister’s trusts. Once everyone signed and had notarized the new deed, I recorded them in each county. Then I contacted all the companies that had leases/division orders of this transfer, and sent them copies of the new deeds. Some of the companies wanted copies of the mother’s trust, and we only sent them part of the trust, not every page. They then sent out new division orders to each sister splitting up the mother’s interest into thirds. Now, they receive their payments directly. I cannot speak to the issue of a trust being held/managed by a bank. That’s the worst way to have a trust! You are lucky to ever see the money again! IMHO I hope this is of some help.

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Dear Judith,

Back in 59 when the first original Trust was set up, Where was Bank America? Fort Worth National,

That was set for all my Mom's sisters and Brothers, then the Trust Department was a Service for the Oil and Gas Clients, 60's Boom time, Banks Fat and Happy, Oil Fields Blooming, Services A Plenty, Airlines included food and freebies just for flying with them. Gas stations washed your windows, Boom Times. When I was 16 I went to borrow some dough to buy suba gear $1500, the Bank said no, but a call to the Trust Department turned that no into a YES. No Favors today, although about 2 years ago, they offered to take me to a Football game, but called to say, they didn't get the tickets.

I like what what you Said and I'm taking it as my new Slogan and Blogg. The Bank is Abusing me. Bank Abuse, Fantastic

RWK, I Only know one type of Trust, so look around perhaps talk to a Attorney, so you might like to do a small trust with your Grandsons or Daughters for the future, so that at a prescribed time they get the Dough, perhaps that puts them in Business with Old Granddad as the Silent Partner or becomes a Travel Fund, even though the Airlines have taken the word Fun out of Flying. That is one of the Things I think about often, how my Grand dad had the fore sight to buy land and sell the land and keep the minerals starting in 23, Wow! I hope I can Pay it Forward like that.

I was interested in your work. My family may be doing the same thing. Since we have rights in different states things get complicated. Especially getting assessments. I wanted to ask if changing ownership means changing any taxes? And, generally what were the recording fees like when you registered deeds? Thank you for any info.

Judith Neeley said:

I have been doing the administrative work to transfer mineral assets in my client’s mother’s trust into the trusts of each of the 3 sisters, the heirs. The trusts were set up with attorneys, and not through any bank or institution. My client is the successor trustee of her mother’s trust. I created new mineral deeds for each county listing all properties within that property, and moving from the mother’s trust naming the 3 sister’s trusts. Once everyone signed and had notarized the new deed, I recorded them in each county. Then I contacted all the companies that had leases/division orders of this transfer, and sent them copies of the new deeds. Some of the companies wanted copies of the mother’s trust, and we only sent them part of the trust, not every page. They then sent out new division orders to each sister splitting up the mother’s interest into thirds. Now, they receive their payments directly. I cannot speak to the issue of a trust being held/managed by a bank. That’s the worst way to have a trust! You are lucky to ever see the money again! IMHO I hope this is of some help.

I did the transfers for about 14 states, and multiple counties in all those states. You have to contact the county recorder in each county and ask their fees for recording, what their recording standards are for the documents, if there are any other forms that have to be included, special tax exemption numbers to include, etc. Each county is different, and they change their requirements, so call the county just before you create the new deed so your information is up to date. Each county has a different fee structure, too. Usually there is one fee for the first page, and a different dollar amount for each page after. I saved a lot of money by combining all properties for each county into one deed where the original deeds were one per property. Some states have standardized their recording requirements, so all counties are the same, many have not. Some counties the fees are quite reasonable, others not. Plus, you have to be sure you have the right font size in your deed so it's not too small. Many counties now scan your document, so they have to meet their tech requirements. Some want a larger margin on one part of the document, either on top of the first page or the last page...and at least a certain margin around the whole document on each page. What gets tricky is getting the legals exactly correct included in the new deed. Since ours were quite complex, I first photocopied the original deed then scanned it, then digitally cut out the legal and pasted it into my new word doc deed - thus no typos or deletions or mistakes. The reason for first photocopying is because if you scan the original and there happens to be any print on the backside of the page, it comes through on the scan when you paste it into your new doc you have smearing and a mess. If you first photocopy and scan that instead, you get a clear paste job. Hope this makes sense. This family has property in 24 states, and it has been a 15 year long project to transfer all these assets and deal with all legal issues to close the trust. We are closing it now! Hooray!

As for taxes, that's another issue. Once the deed is recorded, then write to all the tax agencies and update them on the new owner/address, etc. Make sure you stay up to date with taxes as you could lose a property if you forget to pay one, even if it's only for $5. I had to write to have the taxes split between the 3 heirs. One county is requiring a letter requesting this be signed by each of the heirs, so that is in process now as they all live in different states. I have to coordinate getting all deeds signed and notarized by each heir, then it comes back to me so I can notarize for my client, then send via certified with green return receipt card to the county for recording. When it comes back recorded, then I scan the whole new recorded deed into a file on the computer, and make a number of photocopies for the hard copy file. You'll need those to send to the oil companies when you request the properties be transfered to the new owners. I send everything certified, and maintain a progress spreadsheet for all companies. When they finally send new division orders, I then verify interests, and if they are not NADOA formatted division orders, I create brand new ones in the NADOA format, sometimes attaching an Exhibit of all properties if provided by the company (if multiple properties in one division order, for instance) and once signed I return that along with a cover letter. Once the first payment arrives, I verify the interest against the division order. I have found only one that was incorrect, however it was worth being careful and checking anyway. Don't take anything for granted. Oh yes, also, on the new division order, my client always changes the $100 to $25 (for when $ accumulated when it will be paid) and intitializes. I also scan the signed division order and save it to my files, too. I'm now in the process of setting up another digital file system so all docs are also saved by geographic location as well as company name so she can instantly see all activity on one property over time. Leases change hands, so this way it's easier to track properties.

Rick Tatum said:

I was interested in your work. My family may be doing the same thing. Since we have rights in different states things get complicated. Especially getting assessments. I wanted to ask if changing ownership means changing any taxes? And, generally what were the recording fees like when you registered deeds? Thank you for any info.

Judith Neeley said:
I have been doing the administrative work to transfer mineral assets in my client's mother's trust into the trusts of each of the 3 sisters, the heirs. The trusts were set up with attorneys, and not through any bank or institution. My client is the successor trustee of her mother's trust. I created new mineral deeds for each county listing all properties within that property, and moving from the mother's trust naming the 3 sister's trusts. Once everyone signed and had notarized the new deed, I recorded them in each county. Then I contacted all the companies that had leases/division orders of this transfer, and sent them copies of the new deeds. Some of the companies wanted copies of the mother's trust, and we only sent them part of the trust, not every page. They then sent out new division orders to each sister splitting up the mother's interest into thirds. Now, they receive their payments directly. I cannot speak to the issue of a trust being held/managed by a bank. That's the worst way to have a trust! You are lucky to ever see the money again! IMHO I hope this is of some help.
1 Like



Judith Neeley said:

I did the transfers for about 14 states, and multiple counties in all those states. You have to contact the county recorder in each county and ask their fees for recording, what their recording standards are for the documents, if there are any other forms that have to be included, special tax exemption numbers to include, etc. Each county is different, and they change their requirements, so call the county just before you create the new deed so your information is up to date. Each county has a different fee structure, too. Usually there is one fee for the first page, and a different dollar amount for each page after. I saved a lot of money by combining all properties for each county into one deed where the original deeds were one per property. Some states have standardized their recording requirements, so all counties are the same, many have not. Some counties the fees are quite reasonable, others not. Plus, you have to be sure you have the right font size in your deed so it's not too small. Many counties now scan your document, so they have to meet their tech requirements. Some want a larger margin on one part of the document, either on top of the first page or the last page...and at least a certain margin around the whole document on each page. What gets tricky is getting the legals exactly correct included in the new deed. Since ours were quite complex, I first photocopied the original deed then scanned it, then digitally cut out the legal and pasted it into my new word doc deed - thus no typos or deletions or mistakes. The reason for first photocopying is because if you scan the original and there happens to be any print on the backside of the page, it comes through on the scan when you paste it into your new doc you have smearing and a mess. If you first photocopy and scan that instead, you get a clear paste job. Hope this makes sense. This family has property in 24 states, and it has been a 15 year long project to transfer all these assets and deal with all legal issues to close the trust. We are closing it now! Hooray!

Rick Tatum said:
I was interested in your work. My family may be doing the same thing. Since we have rights in different states things get complicated. Especially getting assessments. I wanted to ask if changing ownership means changing any taxes? And, generally what were the recording fees like when you registered deeds? Thank you for any info.

Judith Neeley said:
I have been doing the administrative work to transfer mineral assets in my client's mother's trust into the trusts of each of the 3 sisters, the heirs. The trusts were set up with attorneys, and not through any bank or institution. My client is the successor trustee of her mother's trust. I created new mineral deeds for each county listing all properties within that property, and moving from the mother's trust naming the 3 sister's trusts. Once everyone signed and had notarized the new deed, I recorded them in each county. Then I contacted all the companies that had leases/division orders of this transfer, and sent them copies of the new deeds. Some of the companies wanted copies of the mother's trust, and we only sent them part of the trust, not every page. They then sent out new division orders to each sister splitting up the mother's interest into thirds. Now, they receive their payments directly. I cannot speak to the issue of a trust being held/managed by a bank. That's the worst way to have a trust! You are lucky to ever see the money again! IMHO I hope this is of some help.

Thanks for the excellent information. I do appreciate all the help. Sounds like a very long process. Glad you are through. Thanks again.

" "

Chris Wilson said:

Dear Allan,

I'm a Trust Baby, so Let me tell you from my point of view what you should do for your heirs.

My Granddad left his Oil and Gas to my Mom and her 4 brothers and sisters and that was in 59, when Trust departments of Banks were a service of the Bank. My Mom Died in 1978, and things past along to me.

My sister and I draw the income from the Trust mainly Oil and Gas Royalties from Grand Mother and Grand Father Property. We receive Checks every month of the year, except December when they pay the Taxes. WE as heirs have no control over the Bank or Trust Department. They raise their fees every year, we can do nothing about it. They take 6% off the top all on Royalties, and 3% off money Investments, and the investment since they go in and out in the same month, don't even make 1.7% yearly returns. Any non producing properties they charge $75 per property per month. Then on top of this they take a $4000 yearly fee. Now you would think that a million dollar Trust would pay a better return than $56,000 split two ways. Still figuring out where all the cash goes.

In the Trust there is My Grand Fathers Office from the 50's, a two story building that sits across the street from TCU University, and the Trust Dept has managed this building for 55 years, and they did not take very good care of it at all. So if you have property that you love, I suggest you sell it while its in it's prime and put the money in Trust. The Bank has continued to ask my sister and I to sell Surface acres we own. We have some 2000 surface acres that have been trying to sell. I just found out recently that we can't sell the Surface Acreage, because then we would lose or Minerals, because this is PSL Public School Lands and in order to split the Minerals with the State of Texas, we must manage the surface. The Trust did not know this.

So just make sure you make a good plan, brainstorm to make sure you cover the bases, will you want your kiddos to be able to get more out, if they need it. After being a Trust Baby for 20 years, I like to tell people that just give it to the kids, and if they blow it, at Least that had the chance. Stay away from Bank America Trust Department.

Also there is the Child Anti Trust Act, in which they take 28.5% out of each month to help the Trust Grow and go on into the future.

One of my Aunts died last year, leaving her stuff to her son and daughter, The Trust Department does not communicate well with heirs, I knew what to do when my Mom died, because I was raised in the town where the Trust is kept and aware of what to do. However my cousin was not, so he hired a attorney to start moving the Royalties over from Grand Dad's account to his. Oh, The Bank went Ballistic, because they were still accepting checks in my Grand fathers name and then splitting them up 6 ways. AFter they got wind of that Cousin, they split all the Division orders up so each one of us got checks in our names. Another thing, I have found several Royalty Checks for my grandmother on the State Unclaimed funds web site. Some how or another the Royalty checks didn't go to the bank, one $9000 Royalty check had been sitting there since 1979.

Just take your time and plan accordingly for your heirs. I would not want them to go through what we have for the last 20 years.

God Bless and Continued Success.

Chris Wilson

Hope this helps a little,

Sincerely,

Chris

When my Mom and Dad died, my brother and I decided to forrm a partnership to hold the royalty (and surface) rights they owned. We did thi instead of a trust because a) partnerhsip interets pass as pesonal property under one's will, rather than real property, b) we could (and did) establish a "buy-sell" provision to buy out another partner, and c) we could admit our children as partners by simple agreement without further dividing the interests (some of whih are already quite small). We have since admitted allthe children, and our wills provide for division of our remaining interest among our idren "per stirpes." Other than havbing to prove (via copy of the relevant provisions of the Partnership Aggreement) that the managing partner (selectd by all the parnters) has the right to sign documents on a few occaisions, this has worled well for us and administration has been esy. Taxes are handled via a "k-1" for each partner's share, and there is no tax at the partnership level.

Good luck

We have a mineral rights trust that was passed to us when our mother passed away. Our uncle is the trustee, and he will not give us any information about the trust, what are the assets of the trust, what are they using the trust money for, do we have any oil wells producing, permitted, drilling, or what he is being paid by the trust. We understand that when the well starts producing, were suppose to get monthly checks from it, we almost 100 % sure we have a well producing and we are not getting any checks. Under north dakota law 59-16, trustee is suppose to be providing information to those peoples names who are on the trust. My understanding is, that we have to write a letter, have a notory sign it, and trustee has 30 days to act on the letter, then is forced to provide the information. Can anyone give us any more information on this?