This is the first article in our series discussing the transfer of mineral rights to heirs in Oklahoma.  If you are an heir to a relative’s mineral rights in Oklahoma, then you must be wondering whether probate is necessary.  Probate is a legal proceeding overseen by the court that determines who is entitled to the decedent’s property.  After the process, the court then enters an order transferring legal title.

Without probate, the mineral rights continue to be titled under the decedent’s name.  This may prevent an oil and gas company from releasing payments or entering into a contract with you.

Our focus in this article is whether probate is necessary and to figure out if it’s the only way to transfer mineral interest to an heir.

Probate is one of the many ways to retitle the decedent’s mineral interest

Real property can be held in several different ways.  It can be held under the name of an individual, under a business entity, a trust, or under the name of two or more individuals as joint tenants.  The need for probate depends on how the interest is titled.  It’s not the only way that property interest is transferred to an heir, but one of the many ways.

Mineral rights titled under a person’s name

If the mineral rights are titled under an individual’s name, then that person’s estate must be probated before the title can be transferred.  This is the case regardless of whether the decedent passed away with or without a valid will.  

John Doe’s mineral interest must be probated if it was titled under John Doe personally.  The fact that he has a will or not does not matter.  The mineral interest must be probated and distributed according to the will – if one exists.  Otherwise, if he died intestate (without a will), then it will be probated and distributed according to Oklahoma succession laws.  84 O.S. § 213.

Mineral rights titled under a business entity

In case the mineral interest is titled under a business entity such as a limited liability company (LLC), then the LLC owns the interest as a separate entity.  The benefit lies in the fact that after a member dies, the LLC does not have to be dissolved.  It can continue to exist and carry on with its business.  

Having a solid operating agreement that addresses the transfer of ownership interest at death may help avoid probate.  However, if you have no estate plan and make no provision in the operating agreement, then your interest in the LLC will have to go through probate.

John Doe is a member of an LLC that owns mineral interest.  Other owners of the LLC are his family members.  Upon John Doe’s passing, the buy-sell provision under the LLC’s operating agreement dictates the provision for the sale of John’s interest to other members.  Because the operating agreement gives instructions on the disposition of John’s interest, no probate may be necessary.

Mineral rights titled under a living trust

Any property interest, including mineral rights, that is titled under a trust (revocable living trust for our purposes) will be disposed of according to the trust provisions. 

The trust terms dictate how and when the trust property is to be distributed to the beneficiaries.  After the trustor (usually also the primary trustee) dies the successor trustee must follow the trust instructions to dispose of the trust property.  This authority allows the successor trustee to transfer title to trust beneficiaries without probate administration.

Jane Doe after executing a revocable living trust transfers her mineral interest into the trust. Doing so will retitle her interest into the name of the trust.  Instead of individually owning the mineral interest, the property is now owned by the trust.  Probate is not required for trust properties to be passed on to the beneficiaries.  If Jane has named her three children as trust beneficiaries, then the interest will be passed on to the children as directed.  This process is accomplished outside of court-supervised probate. 

Mineral rights titled under a joint tenancy

A joint tenancy establishes ownership of a mineral interest among two or more people.  This can be achieved by executing a quit claim deed from the record owner to two or more people as joint tenants with the right of survivorship.  

After the death of a tenant, the surviving member(s) becomes the owner of the property.  They are required to file an affidavit of a surviving tenant with the county clerk. (58 O.S. §912).  This serves as public notice of the transfer.  Mineral interest transfer through joint tenancy is accomplished outside of the probate proceeding.

Although the joint tenancy is successful in avoiding the probate process, it may have unintended consequences.  If the intended heir (other joint tenants) dies first, then their interest is not passed on to their heir.  Instead, it goes to the surviving tenant.  This type of issue arises when a parent and a child own a property interest as joint tenants and the child dies before the parent.

Jane Doe conveys her mineral rights to herself and her daughter as joint tenants with the right of survivorship.  If she dies before her daughter, then her half goes to the daughter.  All the daughter has to do is file an affidavit of the surviving tenant with the county clerk.  However, if the daughter dies first, then her portion goes back to Jane.

OKC Real Estate Attorney

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