Trying to get ahead of the Grim Reaper

I’ve been part of three estate processes and the attorney’s first question always was “Does the deceased have any out of state assets?”

My mother-in-law lives in Texas and she has mineral rights in Lea County 13S-38E. From what I understand if the mineral rights are included in the probate process then it will be expensive and stressful at the worst possible time. My question is if there are transfer-on-death provisions in New Mexico that would simplify and cheapen the costs of transferring her ownership to her children. My parents had utilized this process with some mutual funds that really streamlined the whole thing and had zero cost. Although she could transfer the rights prior to death that doesn’t sit okay with her daughter (my wife) - it’s too much like ‘planning’ her mom’s passing. Thanks in advance for any help.

I just went thru the same process, living in Texas with minerals in Lea Co. My mother had the foresight to sign over her interests in advance (a simple procedure and one I recommend highly). She passed a few years later. Her sister was in a similar situation, but refused to relinquish control. The week before she died, she set up a revokable mineral trust at our urging which kept all her NM assets out of probate (both Texas & NM.) So far, that is working out OK. A few months ago we negotiated a $3+million lease and distributed the money to the 4 heirs. The trust terminates in 10 years, so that will be a bit of a headache to finalize.

I’m not a lawyer. I recommend you speak to one who knows New Mexico law.

It sounds like you might want to have your MIL create a life estate, with her as the life tenant, and her daughter (your wife and any other beneficiaries she may have) as a remainderman. It will transfer the rights of the life tenant to the remaindermen upon death. I don’t think you’d have to probate. You’re MIL could also make her beneficiaries co-tenants of the property as well. It would transfer to the surviving co-tenants upon death.

Just some things to think about and research. Again, do not take my word as gospel. I’m not an attorney.

Transferring upon death may have major tax benefits to the heirs instead of transferring ahead of time. Get good advice from a family estate attorney.

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An attorney licensed in New Mexico should be able to help you. Transfer on Death Deeds or a Mineral Trust are common ways to inexpensively avoid probate.

A joint tenancy in common is a great way to get your name on the ownership list of mineral rights, land, etc when signed by the current owner, generally they are a relative. In your instance you and your wife could be listed as tenants in common with your MIL. SHE CAN REVOKE IT AT ANY TIME.

There is no transfer taxes upon death of current owner, because you become the owner at that point.

We’ve used it in our family. I’m 66 and have a will, It’s the responsible to do if you want to have a say in how your possession’s are distributed. But this is a way for your MIL to have a say in how her assets are distributed. Not morbid. RESPONSIBLE.

I wouldn’t self help any estate planning. As an Oklahoma attorney I deal with many DIY fails that lead to probate, or worse. Unintended disinheritances can & do occur. If the assets are worth anything, involve an attorney licensed in the state where the minerals are located. Transfer on death or land trust keeps the assets & income in mother’s name. However, if Medicaid or Long-term care is potentially needed, an elder law attorney is advisable.

Richard,

I concur completely. It’s never cheap, but doing the right thing DOES require you involve an attorney, if for no other reason than to review everything.

And I personally believe that if you have a will, IT SHOULD BE PROBATED. Then you need to file that probated will in the county where the mineral rights are. THAT also requires an attorney (could be the same attorney, but that is up to you as the mineral owner).

Doing things, involving your attorney AND the court system IS in your favor. This assumes you own the mineral rights or will one day. Do the right thing. Find a great attorney to help you out. TEN YEARS FROM NOW YOU WILL BE GLAD YOU DID.

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When my MIL died a few years ago we probated her will in Texas and hired a Carlsbad, NM attorney who filed a deed of distribution in each of the counties in NM in which she owned minerals. We have done several leases since then and not had any problems at all. I think only one asked to see the probated will. The Carlsbad part was only a few hundred dollars.

Like most other states, New Mexico has the same general real property principals. You can own a mineral interest as joint tenants with right of survivorship, you can grant a “transfer on death,” or you can put the interest in an LLC or a trust. You will have to reach out to your attorney to discuss which might be the best option for you.

Just as an FYI, probate is not always as difficult as some believe it is. For example, if Jane owns an interest in NM, but lives and dies in TX, a PR can be appointed by a TX probate court and the PR’s authority can be “authenticated” in NM simply by filing certified copies of the TX probate filings with the applicable NM court. The foreign PR can then distribute the interest in NM the same as in TX.

We are thinking about setting up an LLC and pouring all our mineral interests in that to avoid ancillary probate proceedings in various States.

Consult your tax advisor about the best entity which could vary by state. Many in Texas use a limited partnership with an LLC as the general partner. Texas does not apply franchise tax to royalties in a partnership, but will apply franchise tax to royalties in LLC. Franchise tax rate is zero until there is significant royalty income. There may be other factors due to state income taxes.

Highly recommended if you have multiple interests and/or family members. My grandfather set-up a company back in the 40’s and it simplified everything so much for all future generations.

As recommended, definitely speak to a CPA about most advantageous tax set-up and also about how shares should be split between family members now and moving forward (we gift shares over time with the eldest generation retaining majority). There are also corporate bylaws to set-up in terms of control (we have a Board w/ quorum requirements so no one family member holds too much say), day-to-day operations, and to help protect the company over time (e.g. our family business requires shareholders to set-up a Will at the age of 18 and to use pre-nups to ensure shares are passed along blood lines avoiding issues and complications due to divorce, unexpected illness/death, etc).

Good luck!

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