With most assets in an estate, if they are not processed, eventually someone will take possession of them one way or another. Like with land, eventually the county will take it if taxes aren’t paid. But what happens with mineral rights if they are not distributed in probate? There could be many reasons for that, such as the mineral rights aren’t known to the heirs, none of the heirs want them, there’s not enough money in the estate to pay for the necessary legal work, there are outstanding liabilities connected to the rights, etc. What eventually happens to the ownership of the rights in the case where they stay in the decedent’s name?
To start with what state are you talking about! Every state is different, I have worked in oklahoma, Texas, Louisiana, Arkansas,
I’m specifically dealing with some interests in NM and TX. I’m helping with a probate where there’s not much estate money to pay for the transfer of the rights, and the heirs aren’t currently interested in putting up their own money to make it happen.
But I would be interested in any discussion about this matter in general for any state. It’s something I’ve wondered about from time to time. I’m sure many rights have been abandoned by the heirs because they didn’t want to go through the time, hassle and money to transfer the rights.
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In my specific case, the decedent doesn’t own 100% of the rights. They just have a tiny, fractional ownership. In some cases it’s just royalty interest. I’m not sure how much value there would really be. We’ll try to get things cataloged and evaluated. If there’s some value, I’m sure the heirs will step up.
But I’m still curious about this issue in general. With most other assets, eventually they go somewhere. Land will go to the county for unpaid taxes, financial accounts go to the state’s unclaimed funds, etc. But with rights, there doesn’t seem to be anything that would cause them to be forfeited like that. It seems like they would stay in the decedent’s name forever since there’s no taxes or payments that would go unpaid and cause them to be forfeited.
Oil and gas interests are real property. Real property must be owned by somebody 100% of the time. So, once a decedent dies, the interest is automatically owned or vested in their heirs. Now there may be no proof or marketable title until an estate proceeding is done, but that doesn’t mean the heirs don’t own the interests. An example of this is an heir may execute or sign an oil and gas lease even before there was an affidavit of death and heirship filed. Now, if they take no action, they still own it. In those states where severed minerals are taxed, then they may be put up for a tax sale at some point.
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This is a similar situation my father had to deal with as executor of my grandfather’s estate back in 1950. My grandfather had 68 separate deeds in 24 counties in 3 states. Only three counties had leases and produced income. My grandfathers estate didn’t have enough cash to divide and distribute these 68 deeds to his four daughters. So the the attorneys suggested they not process divided deeds in any county. So even today, all 68 deeds remain in my grandfather’s name and we file “Affidavits of Heirship” anywhere ownership proof is required.
I have no idea if this is a good practice, and I certainly don’t know all the legal issues that may be lying in wait! But there is no way that my grandfather’s heirs have the money or inclination to spend the money to correct all this.
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What happens in a situation like this where the heirs can’t be located, don’t care, don’t exist, don’t respond, etc.? If the interests can stay in the name of the decedent, it seems like it’s going to be pretty easy for interests to forever be in the name of someone who died ages ago. It could be virtually impossible to figure out which heir or descendant now owns the interest. It seems like it would lead to the interest being essentially lost since it would be such a legal headache to get it straightened out.
That has been my fear too! I have no idea if this will work, but here is what I’ve done:
I created a document for each county that I thought oil companies might be interested in and have filed this tailored to each county.
W. B. Fulton Heirs - SeminoleOK.pdf (118.9 KB)
This may be a total of 100% waste of money, but it was my best effort and something that I could afford! I sure would be interested to hear what others think of this crazy idea.
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In Texas, when heirs to an executive mineral interest can’t be found, sometimes a receiver is appointed for the purpose of signing an oil and gas lease and then holding on to royalty payments until the heirs come forward. The whole process is governed by statute. If you’re dealing with a royalty interest and not an executory interest, then after a while the suspended royalties are given over to the state comptroller as unclaimed property. That whole process is also governed by statute.
Best practice is to probate those mineral rights, or put them in a trust or LLC to be managed over generations. Not all states allow for affidavits of heirship. In Texas it’s pretty common to use affidavits. Ohio has both a dormant mineral act and marketable title act that can can wipe out severed mineral interests, “fixing” (if you see it that way) the missing heirs issue. WVA has the co-tenancy modernization and majority protection act that allows a surface owner to claim “abandoned” mineral rights after a certain period of production. In some states they can be lost at tax sale. Curing title to forgotten minerals is a whole niche practice area for some oil and gas title lawyers (myself included).
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yes, that could happen. But, if I own something and don’t do anything about it, there aren’t really any other options. also, the law is not set up to take people’s mineral interests away, just because they ignore the ownership.
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Probating mineral rights in every county (or even filing “Affidavits of Heirship”) is expensive! Plus handling one county at a time takes a huge amount of time! And if there are no leases, there is no revenue!! So for those of us with very limited budgets, this just can’t really work unless we see a lot of activity taking place near our property or we get contacted by someone interested in leasing or purchasing. I wish there was a better way . . . but as my father always told me - “If wishes were dollars then beggars could buy!”
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In some states it is set up to take away unused mineral rights. Now what “use” means varies. Production is one use. In dormant mineral act states you have to at least put something of record showing that you still claim ownership, so an operator can find you when they want to lease or pay out royalties.
I agree with you, but what about property tax theft?
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One doesn’t have to probate in every county. One probate in a state is sufficient for all properties in that state.
You dont need a probate for every county, the probate for whatever county the decedent lived in is fine. You can then electronically file or mail the copies to the counties/sections in which they owned for around $18 for the 1st page and $2 for each additional page.
My grandfather lived and died in Scott County, VA and my mother died in Washington County, TN. Both had wills and were probated where they died. I did use their VA and TN probate documents to get Lea County, NM probate (Total cost was $60). But in Winkler County, TX I was told I had to file virtually all VA & TN probate documents and it cost $480. In Seminole County, OK I had to file selected VA/TN documents costing $74. All plus mailing costs (about $15).
But all this cost was just a file documents to satisfy operators. Luckily these are the only 3 counties where we have leases but no deeds were changed.
I should add that my mother had 4 sisters that each got their 1/4. And now these ladies are deceased and each had 2 children that each got 1/2 of their mother’s shares . . . I only filed documents for my mothers portions.
I’m sure this has happened in my family. One of my grandfathers always said “Never sell mineral rights as you never know when it will prove to be profitable”. And I can attest to that fact. After 70 years of not ever seeing an old pumper pump, sitting on property, that now has 2 wells producing. Original owner had 8 children. I now hold 1/32 of royalty interest in that property and collecting royalty. I also have rights in New Mexico which I am in the process now of trying to arrange passage to a grandson at my death. I also own 1/3 interest rights of 80 acres in one Oklahoma County that I am now in the process of “gifting” to other great grandchildren of the original owner that do live in Oklahoma. I live in Louisiana and it does become a problem at income tax time when it divides down to almost nothing.
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“Never sell mineral rights as you never know when it will prove to be profitable. After 70 years of not ever seeing an old pumper pump, sitting on property, that now has 2 wells producing. I live in Louisiana and it does become a problem at income tax time when it divides down to almost nothing."
After 70 years of holding on to the minerals, after taxes and still making almost nothing, it seems like the prudent move would be to sell them if you get a good offer? That lump sum of money could have been invested and would end up with more money in the long term. Theres a misconception out there that selling minerals is a bad thing and that mineral companies rake in the money. The number of private equity mineral groups that have gone out of business over the last 10-15 years is shocking due to the prices they were/are paying. There are more mineral owners out there wishing they would have sold at the highest price offer but thought they would have 6-8 wells drilled at high oil and natural gas prices. Then 5 years later, they have 1 well on a sharp decline and the mineral offers and projected income is down 80% and they are kicking themselves, myself included.
How does this kind of situation get straightened out? With the estate I’m currently helping with, I’ve actually run into this situation. There are some interests that are still in the name of the deceased ex-husband (“John”) of the decedent (“Jane”). Jane’s estate is currently in probate. The divorce and John’s death were decades ago. All of the oil interests were granted to Jane during the divorce in the Settlement Agreement, but the ownership was never officially changed. They are still in John’s name in the county records. How does the executor of Jane’s estate transfer these interests that are currently in John’s name to Jane’s heirs?
What state? Happy to discuss, I’ve seen this a number of times.