TRANSFER OF MINERAL AND ROYALTY INTERESTS INTO A TRUST

To facilitate management, limit fractionalization, or for the purpose of avoiding probate, there seems to be an increasing frequency of mineral and royalty interests being transferred into family or intervivos trusts.  For those familiar with oil and gas transactions, the process of transferring interests into a trust may seem simple.  For those who do not deal with oil and gas interests regularly, a few suggestions may be helpful.

Starting with the presumption that the intent is to transfer all of the grantor’s interests to the trust, the following may help accomplish that goal.

  1. When developing an exhibit of the property descriptions to be used in the conveyance documents, do not rely solely on descriptions contained in division orders or oil and gas leases.  They may not describe all of the lands in which the grantor owns interests, or may contain limits as to the depth which are not applicable to the grantor’s interests.
  2. Be cautious in specifying the amount of interest in each property, owned by the grantor, being transferred to the trust.  The only statement of the interest owned, which the grantor may have available, is the statement of a decimal interest on a division order.  That may not reflect all the grantor owns.  If the grantor (or his/her predecessor) owns a mineral interest on which an oil and gas lease has been granted, the division order may only describe the decimal royalty and not describe the underlying mineral interest.

Following are some suggestions on preparing a deed intended to convey all of the grantor’s interest to a trust.

  1. Consider using a deed containing quit claim language (“all rights, title, and interests”), rather than expressing a warranty.  If the intent is to convey all interests, and adequate land and interest descriptions are not available, a quit claim can convey all interests not specifically described.
  2. Expand available land descriptions.  If you are relying on division orders for descriptions, eliminate any depth limitations.  Unless the grantor knows he/she owns interest in only part of a tract, or section, describe all of the lands.
  3. Do not specify interests conveyed.  Rather, recite that the grantor is conveying all of the grantor’s interests, including royalty and mineral interests.
  4. Consider giving the grantee the right to execute further assurances, division and transfer orders, and any other documents necessary or advisable to give effect to the intended transaction.

Kanes Forms Programs (www.Kanesforms.com) contains numerous forms of Deeds (both Mineral and Royalty) and Assignments that can be used, adapted, and tailored to transfer a grantor’s interest into trust.  Individual forms are available on www.uslegalforms.com.   Remember, creating a trust with the intention the trust becomes the owner of all interests is not sufficient.  In addition to the trust instrument, Deeds, Conveyances, and Assignments must also be prepared, properly executed, and filed of record to effect the transfer of interests.