trusts, wills and estates...– summary probate (no inventory prepared, one publication) • estate...

Trusts, Wills and Estates

Kacie Bevers

Overview

• Introduction – Death & Title

• Estates

– Intestate

– Testate

– Common Issues

• Trusts

• In your job, what type of death do you deal with more often?

A. Intestate

B. Testate

C. About the same

Introduction: Death & Title

What happens to title at the moment a single landowner

dies?

Estates – Intestate

• Intestate Defined

– A person is said to die intestate when he dies without making a will, or dies without leaving anything to testify what his wishes were with respect to the disposal of his property after his death

Intestate: Texas

• Actions Required

– Court must officially determine the heirs

– A court may determine through proceedings to declare heirship

• The persons who are the decedent’s heirs and only heirs; and

• The heirs’ respective shares and interests under the laws of this state in the decedent’s estate or, if applicable, in the trust

Community Property vs. Separate Property

• Community Property 101– Spanish (and some French) influence– Spouse’s economic contribution recognized through

co-ownership– Whatever you bring into the marriage or receive

individually through gifts or inheritances remains yours

– Whatever you earn or acquire during the marriage is presumed to be co-owned by both parties

• Inception of title – whether an asset is community or separate property is determined at the time the asset is acquired

• Separate Property – property acquired– Before marriage

– By gift

– By devise or descent

– Property purchased with separate funds

• Community Property– “Not separate property”

– Property acquired by husband or wife during the marriage, when not acquired as separate property


Community Property

Each spouse is a co-owner of ½ of the community property

Spouses are considered partners as opposed to “one person in law”

Each spouse shares equally in any interest that is a result of their joint efforts

Characteristics

• Bonus Payments

• Royalty Payments

Remains Separate Property

Becomes Community

Property

• Delay Rentals


Surviving spouse is entitled to:

• A 1/3 life estate in Deceased’s separate real property

• All of Deceased’s share (1/2) of the community property

Children are entitled to:

• All of Deceased’s separate real property (subject to 1/3 life estate)

• None of Deceased's share (1/2) of the community property

There is no will (“intestate”) and all of Deceased’s Children are also children of Surviving Spouse (after

September 1, 1993)


• A 1/3 life estate in Deceased’s separate real property

• None of Deceased’s share (1/2) of the community property

Children are entitled to:

• All of Deceased’s separate real property (subject to 1/3 life estate)

• All of Deceased's share (1/2) of the community property

There is no will (“intestate”) and at least one of Deceased’s children is from outside the marriage

(after September 1, 1993)



• 1/2 of Deceased’s separate real property (or all, if no other descendants)

• All of Deceased’s share (1/2) of the community property

Other Family Members (parents, siblings, other

descendants):

• 1/2 of Deceased’s separate real property (distribution varies by statute)

• None of Deceased's share (1/2) of the community property

There is no will (“intestate”) and there are no children (after September 1, 1993)


• Property possessed by either spouse during the marriage is presumed to be community property

• Burden of proof is on the party contending it is separate property

• Must prove by “clear and convincing evidence”


Intestate: Oklahoma

• No issue: 1/2 to surviving spouse (SS) and 1/2 todecedent’s parents, unless acquired by joint industry,then all to SS

• One issue: 1/2 to SS and 1/2 to child

• More than one issue: 1/3 to SS and remainder in equalshares to children

• Child predeceases: lawful heirs take by right ofrepresentation (84 O.S. § 213)

Prior to July 1, 1985

Intestate: Oklahoma

• John dies intestate survived by his mother and his wife: 1/2to his mother and 1/2 to his wife

• John dies intestate survived by his wife and his sevenchildren: 1/3 to SS and each child inherits 1/7 of theremaining 2/3

• John dies intestate survived by his wife and twograndchildren: 1/3 to SS and 1/3 to each grandchild

• John dies intestate survived by his wife, daughter, and twochildren of deceased son: 1/3 to SS, 1/3 to daughter, 1/6 toeach grandchild

Prior to July 1, 1985

Intestate: Oklahoma

• No issue: 1/3 to surviving spouse (SS) and 2/3 todecedent’s parents or other surviving heirs, unlessacquired by joint industry, then all to SS

• Issue: 1/2 to SS and 1/2 to children

• Issue, but one or more are not issue of SS: 1/2 ofjoint industry property to SS, plus equal share inremainder of estate with all issue (84 O.S. § 213)

After July 1, 1985

Intestate: Oklahoma

• John dies intestate survived by his mother and his wife:2/3 to his mother and 1/3 to his wife, unless acquiredby joint industry, then all to wife

• John dies intestate survived by his wife and twograndchildren: 1/2 to SS and 1/4 to each grandchild

• John dies intestate survived by his own 2 kids: SSinherits 1/2 of property acquired by joint industry; SSand 2 kids each inherit an equal share of remainder ofproperty (1/3 each)

After July 1, 1985

Testate

• Testate– One who has made a will; one who dies leaving a

will

• Will– “A will is generally defined as an instrument by

which a person makes a disposition of his property to take effect at his death, and which by its own nature is ambulatory and revocable during his lifetime.” In re Estate of Brown, 507 S.W.2d 801, 803 (Tex. Civ. App.–Dallas 1974)

Testate

• Testator – A person who has made a will who – Is 18 years of age or older,

– Is or has been married; or

– Is a member of the armed forces of the United States

• Devisee: One who is devised property by testator by will

• Executor: A person or institution appointed by a testator to carry out the terms of their will

Testate

• Actions Required– A will is not valid to pass title until it is probated

• Elements of a will– In writing

– Signed by • Testator in person OR

• Another person on behalf of the testator– In the testator’s presence

– Under the testator’s direction

– Attested by two or more credible witnesses

Testate

• Holographic Will– A will written wholly in the testator’s handwriting

– Not required to be attested by subscribing witness

• Oral Wills (Nuncupative Wills): – Not Valid in Texas after September 1, 2007

– Extremely limited in Oklahoma

• Contesting Will– Statutory and common law options

– Mistake, undue influence and fraud

Testate

• Texas: Foreign Wills – Will probated outside of Texas in any of the United

States, its territories, the District of Columbia, or any foreign nation.

– May rely upon an exemplified copy of a will probated outside of Texas, as being effective to pass title in Texas owned by a decedent, if the will and the order admitting the will to probate are probated in Texas pursuant to the Texas Estates Code

Testate

• Oklahoma: Ancillary Probate – OK minerals owned by out of state resident

– Must go through probate process for heirs to obtain clear and marketable title (58 O.S. § 51-53)

• Need authenticated copies of the will and foreign order admitting will to probate

– Summary Probate (no inventory prepared, one publication)

• Estate of $200,000 or less

– Dead for at least five years; or

– Decedent resided in another jurisdiction at time of death (58 O.S. § 245)

• Affidavits of Heirship are used only with intestate deaths.

A. True

B. False

Affidavits of Heirship

• When Used– Died Intestate

• If a decedent dies intestate, real property passes upon the death of the decedent

• Formal probate proceedings can be a lengthy process and sometimes expensive process.

– Died Testate• Affidavits of Heirship used

– After the statute of limitations has passed OR, when

– Descendants of the decedent would take the same under the will


• Texas

– In the absence of information to the contrary, an examiner may rely upon an affidavit of heirship with respect to the family history and the identity of heirs of a decedent

– Prima facie evidence if the document has been of record five years in the county where the land is located or the county where the decedent had his domicile or residence at the time of his death.


• Oklahoma– Affidavits cannot be used as a substitute for a probate of a

will

– A purchaser of a severed mineral interest acquiresmarketable title from someone who claims their interestunder an affidavit if that affidavit meets certain criteria,including:

• States decedent died intestate

• Lists names of heirs and their relationship to decedent

• Recorded for at least ten years (16 O.S. § 67)

Common Issues – Affidavits of Heirship

• Affiant– Landman Affidavits

• Possibility of slander of title

– Interested Parties vs. Disinterested Parties

• Best practices – Research and check information

– Statements must be their own

– Include strong language on penalties of false statements


• Recently Deceased Decedent

• Multigenerational Affidavits

• Appropriate Intestacy Laws / Date of Death

– Married

– Half-bloods

– Adopted children

• Testate vs. Intestate

• Same Sex Marriage


• An examiner may rely upon an affidavit unless the examiner has a reasonable basis to question its reliability. In deciding whether to rely upon an affidavit, the title examiner may consider relevant factors, such as:– The date on which the affidavit was made and, if recorded, the length

of time it has been recorded;– Whether the party or parties making the affidavit were interested or

disinterested;– The completeness of the affidavit, whether it recites facts or merely

draws conclusions, and whether it discloses the basis of the maker’s knowledge;

– The value of the interest in the property under examination;– Whether more reliable and readily obtainable proof is available; and – The cost and feasibility of alternative procedures to establish title.

Other Common Issues

• Powers of Executor / Administrator

– Before accepting a deed from an executor or an independent administrator, an examiner should be satisfied that all statutory requirements were met in the appointment of the representative, that the representative is qualified to execute the deed, and that the representative’s act is authorized by the will or by law.

• Federal Estate Taxes

Transfer on Death Deeds

• Decedents dying after September 1, 2015

• Elements

– Meets standards of recordable deed in Texas

– States that the transfer will not occur until death of Grantor; and

– Recorded before Grantor’s death


• Common Issues

– Failing to meet requirements of a deed

– Deed cannot be executed by POA

– Concurrent interests to beneficiaries are in equal and undivided shares with no right of survivorship

– Revocation of one transferor

– Will may not revoke or supersede


• Common Issues– Otherwise valid transfer on death deed is void if

subsequently • A valid instrument conveying the interest is recorded in

the deed records in the county clerk’s office of the same county in which the transfer on death deed is recorded; and

• The recording of the instrument occurs before the transferor’s death.

– Effect of divorce

– Issues with joint tenancy

Trusts

• Introduction

• Overview

– Trust Definitions

– Basic Operations of Trust

– Trust Today

Trusts

• Definitions – Express Trusts– Settlor

• A person who makes a settlement of property, especially, one who sets up the trust

– Trustee • One who, having legal title to property, holds it in trust for

the benefit of another and owes a fiduciary duty to that beneficiary

– Beneficiary• A person who is designated to benefit from an appointment,

disposition or assignment; one designated to receive something as a result of a legal arrangement or instrument

Trusts

• Basic Operation of a Trust

– Situations where outright gift does not make sense

• Minors

• Those Prone to Undue Influence or Without Financial Skills

• Spendthrifts

– Protects Against Settlor’s Unavailability

• Illness or Injury

• Military Service

• Otherwise Unavailable

Trusts

• Basic Operation of a Trust

– Avoids Probate

– Privacy

– Provides Tax Benefits

– Allows for Flexibility of Distribution of Assets

Trusts

• To create a trust, settlor must have

– Capacity

– Express Intent

• Trust must

– Name beneficiary

– Have a valid purpose

• Trustee must

– Have duties to perform

Types of Trusts

• Testamentary Trust

• Inter vivos Trust Irrevocable Trust Revocable Trust

Definition A trust that cannot be terminated by

the settlor once it is created

A trust that can be terminated at a

later date and assets are transferred

back to the settlor

Owner (Tax Perspective) Trust Individual

Appointment of Trustee Independent Person Settlor (often)

Asset Protection Yes No

Estate Tax Charged? No Yes

Avoid Probate Yes Yes

Types of Trusts

• Charitable Trusts

– Must be for charitable purposes

– Beneficiaries to trust must be indefinite

– Trust may be perpetual

• Oral Trusts vs. Statute of Frauds

– Oral trusts in real estate prohibited. A trust may be created orally through a declaration of trust; however, if it involves the transfer of real property, it must be in writing.

Trustee Powers

• Exercise any powers that are necessary or appropriate to carry out the purposes of the trust

• Manage, invest and reinvest• Contract to sell, sell and convey, or grant an option to sell real or personal

property at public auction or private sale• Take a lease

– May execute a lease containing terms or options that extend beyond the duration of the trust

• Enter into mineral transactions, including– Negotiating and making oil, gas and other mineral leases covering any land,

mineral, or royalty interest of a trust estate with land, mineral leasehold, mineral, royalty, or other interest of one or more persons or entities for the purpose of developing and producing oil, gas or other minerals, and making leases or assignments granting the right to pool and unitize

– Drilling of wells– Entering into farmout contracts– Negotiating the transfer of and transferring of oil, gas or other minerals leases or

interests (ex: ORRI)– Mineral transactions that extend beyond the term of the trust

Modifications & Termination & Removal

• Modifications

– Revocable Trust

– Irrevocable Trust

• Termination

– Insufficient value

• Trustee Resignation

• Trustee Removal

Conveyances Involving Trustees

• An examiner should confirm the identity and powers of the trustee and whether the trust was in effect at the time of a trust transaction. – Trust Instrument / Certificate of Trust

– 20 years / Ancient Document Rule

• If property is conveyed to a person identified as ‘‘trustee,’’ but the conveyance does not identify the trust or disclose the names of the beneficiaries, an examiner may presume the authority of the trustee to convey, transfer or encumber the title to the property.

• Can a trustee use an attorney-in-fact?

A. Yes

B. No

Recent Change – 9/1/2017

• A trustee may employ attorneys, accountants, agents, including investment agents, and brokers reasonably necessary in the administration of the trust estate.

• A trustee may grant an agent powers with respect to property of the trust to act for the trustee in any lawful manner for purposes of real property transactions.

• A delegation to an agent terminates six months from the date of the acknowledgment of the written delegation unless terminated earlier by – the death or incapacity of the trustee– the resignation or removal of the trustee, or – a date specified in the written delegation.

• A trustee may delegate powers if the governing instrument does not affirmatively permit the trustee to hire agents or expressly prohibit the trustee from hiring agents

Disclaimer

These materials are public information and have been prepared solelyfor educational purposes to contribute to the understanding of energyand oil and gas law. These materials reflect only the personal views ofthe authors and are not individualized legal advice. It is understoodthat each case is fact-specific, and that the appropriate solution in anycase will vary. Therefore, these materials may or may not be relevantto any particular situation. Thus, the authors and Steptoe & JohnsonPLLC cannot be bound either philosophically or as representatives oftheir various present and future clients to the comments expressed inthese materials. The presentation of these materials does not establishany form of attorney-client relationship with the authors or Steptoe &Johnson PLLC. While every attempt was made to insure that thesematerials are accurate, errors or omissions may be contained therein,for which any liability is disclaimed.

Contact Information

Kacie Bevers(281) 203-5770

[email protected]

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