Remember that movie, “What Lies Beneath”? Well, maybe not because it didn’t get the best reviews. It’s a 2000 movie starring Harrison Ford and Michelle Pfeiffer in which dark secrets are unveiled. Well, land is a lot like that especially if you have not only the value of the land on top, but what lies beneath – oil, gas and mineral rights. If you don’t have the proper estate planning for these kinds of non-traditional assets, then getting access to them can become a nightmare like the movie, dredging up ghosts from the past.
Non-traditional assets: oil, gas and mineral rights.
Land can have two values. The value of the land on top, where the house sits and or the farm is operated, and the value underneath, the mineral rights. These mineral rights can contain the rights to any oil, gas or minerals that are extracted from below the surface of the ground.
We have had a number of clients whose families sold off the top value of the land, but reserved the mineral rights. Later those mineral rights became valuable as oil or natural gas was found on that property. When exploration companies come in, they pay the owner of the mineral rights fees based upon the amount of oil or gas that they are able to extract from below the ground.
The recent gasoline shortages in North Carolina, due to a leaking pipeline several States away, makes us each acutely aware of our need for fuel.
How do you convey your oil, gas and mineral rights from your grandparents in Texas, Oklahoma or North Dakota, when you live in North Carolina?
Simple answer – carefully.
This is the exact issue we are helping a North Carolina client with who has oil rights in Texas through a grandparent.
As we have discussed, Wills run through Probate Court (read our blog, A Common Will Misconception: A Will Does Not Avoid Probate). A North Carolina Will moves land that is titled in your name that is located in this State. (A non-land asset may also be moved by that Will – bank accounts, investment accounts, automobile, etc).
When you have an ownership interest in land in another State, controlled by a Will, you often have to do what is called an “Ancillary Probate” where you are opening a new Probate Court proceeding in that other State just to move that piece of out of State land interest.
It can get even more unusual as mineral rights – oil & gas rights – may be transferred in another State differently from a Deed conveying the top of the land. Also, the version of a conveyance of mineral rights maybe different from each State. It can be different with the clients with gas and oil rights in Texas, as opposed to those in North Dakota.
Is this starting to sound like a horror film?
What do you do with the out-of-state oil, gas and mineral rights?
You need to specifically find out what that State uses in regards to those oil, gas and mineral rights. Is it just an Assignment of a Lease? Is it an Assignment of a Lease that is recorded with the Registrar of Deeds in that county, in that other State? Is it an actual deed for the oil, gas and mineral rights? You will need to get an experienced Estate planning Attorney in that State to determine how these oil, gas and mineral rights are controlled and conveyed after death.
What about skipping Probate Court with your Living Trust?
If you want to have the benefits of skipping Probate Court through a Living Trust, you may need to convey whatever legal interests you have in any oil, gas or mineral rights in that particular State into your Living Trust.
Is that done in an Assignment of Lease or does it require an actual Deed or is there Another Way?
You will need to contact an Estate Planning attorney for that State and find out how that interest is conveyed. Often that entails hiring that attorney in that State to assist you in conveying the mineral rights interest into your existing Living Trust.
What we own is not always a traditional asset. It’s not always just the house, the bank account, the investment account and the car. It may include assets that are not so obvious – oil, gas and mineral rights, in your home State or out-of-State. It may also include “Digital Assets” (Death, Digital Assets & the Law: Part 1) ) that need to be conveyed and controlled.
You will want to be sure to have an experience Estate Planning Attorney who can help you with your traditional assets and your non-traditional assets so it doesn’t become a nightmare.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.