Seeking advice regarding Oil Properties in Texas

Oil and Gas Leasing Help
1

The trustee that is in charge of my mother's "Will", desires to complete his duty this year by dissolving the only remaining assets of this "Will". I was about to make an offer to match the offer from a Texas corporation; however, the trustee said it's not that simple. Currently, he has an offer for 26K on the table right now. He said it might not be the best offer, but the reason why he selected this Texas corporation; because they will take over all the hassle of documenting the transfers etc. The accounts have consistently accumulated at least 5K royalty incomes annually for years. The trustee wishes to release himself from his responsibility of managing this “Will” after almost 20 years since my mom’s passing. He said that if I decline to sign the document, then he will have to find another trustee at the expense of the account (which he will deduct that expense from the current 10K balance in the account).

My questions are:

1. If I want to have this Will transferred to my name, what actions should I take in order to make an offer to the other beneficiary of this Will (which is my sister, who currently lives on the East Coast). The difficult part is: Neither my sister or myself have ever been informed from our mom or this trustee about where exactly these oil properties are located, except we only know they are all in Texas. The trustee of my mom’s Will said there are many of them but most of these oil properties are not producing like they used to back in 1984-1990.

2. Am I eligible to find out where exactly these oil properties are? If so, how to go about it? I am residing on the West Coast.

Hopefully I can get some advice to make an educated decision. Thank you.
2

The trustee must know exactly what you own and where it is located, as does the party who wishes to purchase the property. If you and your sister are the only heirs, he could deed 1/2 interest to each of you.

If you purchase your sister's interest, pay her 1/2 of the offered amount. Normally producing property values are based on 3 to 5 years production.

I would not agree to sign anything before you know exactly what you own and where it is located. Some areas of Texas are very active right now.

3

Thanks Laura.

The trustee is a family relative and he has many other things to occupy his time. This year he just wants to end his duty on my mom's Will. He desires to avoid all the hassle of documenting the transfer's and encouraged me to do the same.

I don't plan to sign the sale document.... I just want to know more details on what should I do to find out where are these oil properties located, and what is the current status on each of them. It doesn't seem like I can get this information easily from this trustee. Am I eligible to know these details and request to have a copy of any records of these oil properties from this trustee?

4

I have some basic questions. You refer to the relative as a "trustee." Did your mother leave her property in a trust or is this person an independent executor of her will? Either way, a trustee or executor has a fiduicary responsibility to the beneficiaries. Was your mother a resident of the State of Texas at the time of her death? Do you have a copy of your mother's will or trust document? If a will, was it probated and in what county? This information is key in your getting the right answers.

5

I don’t understand why the Trustee is not forthcoming with this information. If he is receiving income, that info is on every royalty check, or some identification. The company issuing the check has the information. In the county where production occurs there is ownership information on file, or the oil company can provide information to you…the instrument he is asking you to sign should have that information on it, and again, the purchaser of the interest has that information. Sometimes it helps to have a face to face meeting to get a resolution.

6

My mom was a resident of California and lived on the West Coast for her entire life. She passed away during my college time, about 20 years ago. My mom appointed my Uncle to act as her independent “Executor” as well as “Trustee” for her will; and, my Uncle opened this “Trust” account at Bank of America, which he is still managing to this day. I did not keep the copy of my mom’s “Will”; but, I remember that my Uncle read this “Will” for my sister and myself right after my mom’s passing. It is an official document, probated in California (I forgot what county it was).


6th Generation Texan said:

I have some basic questions. You refer to the relative as a "trustee." Did your mother leave her property in a trust or is this person an independent executor of her will? Either way, a trustee or executor has a fiduicary responsibility to the beneficiaries. Was your mother a resident of the State of Texas at the time of her death? Do you have a copy of your mother's will or trust document? If a will, was it probated and in what county? This information is key in your getting the right answers.

7

Hi Laura,

The check that I have been receiving each year comes from the trustee (which is my uncle's) bank account. It seems like he receives multiple individual checks from these oil properties and then he deposits them to his bank account that is specifically used for our trust assets. He is the “Executor” as well as the “Trustee” appointed by my Mother. I addressed my interest of making an offer to him; and, below is his response:

----------------------------------

I don't think you will want to work through the tedium of documenting the transaction. I certainly will not document it as it is doubtful that I could so without spending time and money. It will require a trip to Texas and finding counsel to work through. There are too many individual properties to make the transaction simple and I'm presently negotiating a bid that may not be the best price but the buyer is very knowledgeable and will carry the entire burden of documentation so that we net a straight and clean amount of $26,000.

I certainly cannot recommend that you acquire the property as it will be a continuing burden of management for you and as more of the wells are capped the revenue is totally dependent upon the world market price going higher on what will be a diminishing volume. There are buyers for the units now at a price of 5 times annual income with a reserve for diminishing volume of about 10% to 20%. There also remains a taxable capital gains tax due on the sale, even if it is to you. The original estimated value in the estate was about $5,000. So a sale at say $25,000 will require you to realize a capital gain of ½ of $20,000, even if you buy it.

----------------------------------

My thought on the first paragraph:

I don’t think another trustee outside of the family would be interested to manage a trust with such a small amount of money (having to find another trustee that may be interested will not be easy, and most likely will not be a good one). If I am going to make an offer to match the current offer on the table, why does this trustee need to find another trustee to replace himself?

My thought on the second paragraph:

This trustee has never made any trip to Texas himself, in order to find out what the details are about these wells. He had stated many years ago that these wells would be drying up and that would be the end of it. Instead, around 8 years ago, the annual revenue of these oil properties started producing income of about $5,000 - $6,000 annually. Recently, when this trustee wished to remove himself from this duty, he had already received 6 offers on the table. I am just thinking…somebody must know something is happening on these wells; otherwise, no corporation would want to put in an offer at 5 times the whole lot’s accumulated annual income. Unfortunately, it will be hard to reason out with this trustee. He is approaching 80 years old, and I have to be sensitive about challenging his decision on what is best for these properties. However, I don’t want to just sign the document and let the sale go through without understanding exactly the situation of these wells.

How should I go about it? Why is there a need for a replacement trustee? Can I just find a certified person to process the document transfer, along with sending a check to cover the one other beneficiary’s (which is my sister's) share? In this situation, what kind of expertise should a person have in order to handle documenting all of this? Should I look for an oil and gas attorney in my area or should I look for an attorney in Texas? Do I need to find a landman, if so, how much approximately will it cost?

Thanks!
8


Hi Chris,

First thing I would do is find out what county the will was probated in and get a copy of it ! It may say where these wells are at prehaps.
Chris said:

My mom was a resident of California and lived on the West Coast for her entire life. She passed away during my college time, about 20 years ago. My mom appointed my Uncle to act as her independent “Executor” as well as “Trustee” for her will; and, my Uncle opened this “Trust” account at Bank of America, which he is still managing to this day. I did not keep the copy of my mom’s “Will”; but, I remember that my Uncle read this “Will” for my sister and myself right after my mom’s passing. It is an official document, probated in California (I forgot what county it was).


6th Generation Texan said:

I have some basic questions. You refer to the relative as a "trustee." Did your mother leave her property in a trust or is this person an independent executor of her will? Either way, a trustee or executor has a fiduicary responsibility to the beneficiaries. Was your mother a resident of the State of Texas at the time of her death? Do you have a copy of your mother's will or trust document? If a will, was it probated and in what county? This information is key in your getting the right answers.

9

Something doesnt seem right.

First, make sure a Trust was set up.

People here in Texas are sometimes encouraged to set up a Trust to avoid probate costs.

I strongly discourage people from doing this unless they have complete 100% trust in the trustee.

In my own family situation, the Trustee fees & Attorney fees were 25 times what normal probate costs would have been...and as a beneficary there isnt a damn thing you can do about it.

And we do have large estates in Texas on which the Trustee & attys keep open the estate for many yrs so they can collect fees each yr, but it makes no sense for the estate to be open 20 yrs for $5,000

Secondly, if a trust was officially set up, ask the trustee to send you a copy & a list of the mineral interest that are producing

Then you can decide what to do next.

10

Please don't tell me that you haven't received periodic accountings of your Mother's estate and how your inheritance was being managed and spent ?

Ask your uncle to forward a copy of the Trust/Will and to include a list of the producing mineral interests and their legal descriptions. Maybe even ask for a list of the remaining estate assets, or the last six months of bank statements, or the last six months of accounting. Ooops, sorry, he would have to charged the estate for his time. I was getting carried away.

But, it is his responsibility to make accountings to your and your sister, so don't accept any excuses.

Look up the word "fiduciary" responsibility. There's something to his responses that smells like the "back 50" on a windy day.

Get a "grip." You don't need an attorney.

Good luck.

11

Hi Pat,

Thank you for your input. Well, I hate to tell you but your first intuition was correct…. I never received accounting reports on this trust account. It never crossed my mind to question his discretion on managing this account. I only started scratching my head when: I received his email last week that he has been negotiating with 6 different buyers for these oil properties, and he already selected one corporation in Texas, who is willing to pay $26K, along with taking over all the hassle of documenting the transfer.

I don’t have a close relationship to him nor his family, and I don’t want to put any pressure on him at his old age. At this point, I just want to know what to do looking forward, if I want to take over these oil properties legally myself; and, just match the other offer on the table. From his response, he made it sound like a hassle for me to even make an offer (I copied his response to this forum earlier today). My uncle is not an expert on these oil property issues, that is why I want to know is it really a hassle or not? If yes, then I would like to get a clear idea on how difficult it really is to make an offer and manage this account myself (I think my sister has already signed the sale document and did not challenge my uncle’s decision and authority). Without my signature, this sale will not go through.

Ms. Pat Malone said:

Please don't tell me that you haven't received periodic accountings of your Mother's estate and how your inheritance was being managed and spent ?

Ask your uncle to forward a copy of the Trust/Will and to include a list of the producing mineral interests and their legal descriptions. Maybe even ask for a list of the remaining estate assets, or the last six months of bank statements, or the last six months of accounting. Ooops, sorry, he would have to charged the estate for his time. I was getting carried away.

But, it is his responsibility to make accountings to your and your sister, so don't accept any excuses.

Look up the word "fiduciary" responsibility. There's something to his responses that smells like the "back 50" on a windy day.

Get a "grip." You don't need an attorney.

Good luck.

12

I think you can hire the talent and experience to draw up a good purchase contract. and all the trustee will be required to do is sign and notorize it and send you and your sister your checks. Then the trustee can do what he was going to do after the Texas co bought the minerals, except possibly take that vacation cruise to Alaska (or wherever) for choosing a particular company that did not make the highest offer. If these minerals ( you never said if you owned surface, or I missed it ) are the remainder of the trust, after you have purchased them, your relative can dissolve the trust as he wishes. I’d just be firm and tell your relative that you want those minerals. I am not a tax lawyer but I’m pretty sure neither is your uncle. You will have capitol gains tax whoever buys the minerals, won’t you? 1/2 of $20,000 is $10,000 X 15% = $1500, that I suppose you would have to pay whether you are the purchaser or not. I think you should talk to a good CPA also. My opinion is that if you want them and can afford them , you should buy the minerals. Ditto to Ms. Malone’s reply. Good luck whatever you do.

13

Chris, hopefully, you don't mind my little assertive comments, but I would say that your uncle is an expert at managing others assets for 20 years without being accountable. BTW, 80 is not considered old these days ... just an extended babyboomer.

Ask your uncle to show you, on paper, the other offer he wants to accept and you match it and jump in. Then, you can sign up and join this forum. Don't you have any friends who are CPAs?.

I'm excited to know that you want to buy the minerals.

We have a saying here in Texas.

Whiskey's for drinking ... land, minerals, and water's for fighting. Actually, I elaborated a little for your cause. It's ... Whiskey's for drinking ... water's for fighting.

Go for it!

Pat

14

Normally, the trustee can sell w/out your approval

So I'd immediately write him & tell him not to take any action w/out your ok as you may be interested in buying your sister out.

15

Wow, I did not know that. Thanks Dillon!



Dillon said:

Normally, the trustee can sell w/out your approval

So I'd immediately write him & tell him not to take any action w/out your ok as you may be interested in buying your sister out.

16

Hi Chris, oh so many questions come to mind regarding this tangled web! I guess that you don't know if your mother owned land with minerals or only a royalty interest. If her will left everything to you and your sister equally, why hasn't your uncle simply deeded you and your sister your mother's mineral or royalty interests? If your mother actually set up a trust, it would seem that it would end after a certain length of time. I see no reason at all for a sale. The hassle and expense he mentions in documenting sounds ridiculous. This appears to be an easy way out for him to not have to gather the deeds and hire a lawyer (out of trust funds) to make the transfer.

You buying your sister's undivided 1/2 interest would be relatively simple if you knew what the two of you owned. You could pay $13,000 for her part (1/2 of the $26,000 offered by the company in Texas). However, it seems that your uncle would have to transfer your interests to the both of you first. I don't know if a Quit Claim deed from your sister would suffice in this instance.

First and foremost, you have to have a list of all of the property owned by your mother's estate or the trust, if there was one actually created. Opening up a bank account doesn't result in a trust. Why would your mother have created a trust on a $5,000 estate? Could it be that your uncle took it upon himself as an Executor of her estate to handle it in this manner rather than executing a transfer deed to your sister and you? It is imperative that you know what the will says. It would be worth your time to go see your Uncle, look at all the papers, see what your mother owned, what counties her properties are located in, get copies, etc., cause it doesn't sound like you are going to get too much information otherwise.

I would sure hold on to the minerals like you want to do. If the wells are producing $5,000 a year, it won't take long to recoup your $13,000 investment. Who knows what they may be worth with all of the horizontal drilling going on in the new oil/gas fields of Texas.

I wish you the best in your search for the truth and getting this situation resolved to your satisfaction. There is nothing like hindsight and you want to uncover every stone. Your uncle's duty is to you and your sister and he has failed in keeping you informed. Keep us posted!

17

Thank you so much for all this helpful information. I am hoping my uncle, as the Executor of my mother’s Will, won’t just act upon himself and execute the sale without my signature. I don’t have any idea if my mother owned the surface or only the royalty interest. I am going to write him back and ask him to mail me a copy of the sale document that he wants me to sign. I guess this is the only way I can find out more details about these oil properties. I am so grateful to all of you on this forum for being helpful with all the knowledge.

18

You said you do not have a copy of your mother's will and can't remember which county it was. If your sister could remember that would help. It seems that a good first step is finding out where the will was filed and probated. Then get a copy of it. If there were a formal trust there is some paperwork somewhere for that. Probably in the same county? Where does your uncle live? same place your mother did?

As someone mentioned, the will might specify the assets (including the oil and gas interests). If not the trust paperwork should.

If you really want to keep the oil and gas interests (I think you do and I think your reasoning is very good on it - if someone else wants it it must be worth more than being offered) it sounds like a lot of work but worth doing. The first step is the will.

19

I had an old man tell me about 35 year’s ago what he thought about a trust. He said, “To Trust is to Bust!” He was in finance and said he did not like dealing with trustee’s, especially bank turstee’s. Trustee’s don’t work for free, They are getting a percentage of your money. You and your sister need to get control of what is your’s. It sounds like your property is probably worth a lot more than your uncle letting you know. Sounds like you and your sister have been getting the “shaft”.

Dillon said:

Something doesnt seem right.

First, make sure a Trust was set up.

People here in Texas are sometimes encouraged to set up a Trust to avoid probate costs.

I strongly discourage people from doing this unless they have complete 100% trust in the trustee.

In my own family situation, the Trustee fees & Attorney fees were 25 times what normal probate costs would have been...and as a beneficary there isnt a damn thing you can do about it.

And we do have large estates in Texas on which the Trustee & attys keep open the estate for many yrs so they can collect fees each yr, but it makes no sense for the estate to be open 20 yrs for $5,000

Secondly, if a trust was officially set up, ask the trustee to send you a copy & a list of the mineral interest that are producing

Then you can decide what to do next.

20

I had an old man in finance tell me about 35 year’s ago that to “trust is to bust”. I asked him what he meant and he said that he had many bad experiences dealing with Trust and Trustee’s. Over the year’s I have learned what he meant. Most trustee’s are getting at least 5% of the money and some might be getting nearly all of it. I would suspect that you uncle is , you and your sister! I would not sell the minerals period.