Decedent Mineral Asset Checklist

1. Discovery — confirm minerals are in the estate

Most decedent mineral interests surface only when royalty checks stop or arrive in the personal representative’s name. Build the file from these sources before relying on family memory.

• Last 24 months of royalty check stubs or ACH advice (operator-by-operator)
• Last 5 years of Form 1099-MISC / 1099-NEC reporting royalty income
• K-1s from oil & gas partnerships, LLCs, or working-interest joint ventures
• Division orders received in the last 12 months (each carries the operator, lease, and decimal)
• Suspended-payment notices or letters in title from operators or their land departments
• Prior estate plans, trusts, or community-property inventories listing mineral interests
• State unclaimed-property database search in every state of historic residence and every state where wells are known to exist
• County-by-county deed records (grantor/grantee index) for any county where the family ever owned surface or minerals

2. Location — pin each interest to a tract and a well

A royalty check is not enough; you need the legal description, the producing well(s), and the operator of record before you can value, probate, or convey the interest.

• Legal description: state, county, abstract / survey, section–township–range (or metes and bounds)
• Lease(s) of record affecting the tract — original lessor, current lessee, effective date, primary term, royalty fraction
• Pooling / unitization orders affecting the tract (especially OK Corporation Commission orders, NM OCD pool orders, TX Railroad Commission Form W-1 unit designations)
• Producing well(s) on or pooled with the tract — API number, operator, spud date, status (producing / shut-in / plugged)
• Operator name(s) and remit-to address(es) currently paying
• Most recent 12 months of well-level production volumes (state regulator filings)

3. Classification — what kind of interest is it?

Misclassifying a non-participating royalty interest (NPRI) as a mineral interest is the single most common probate-stage error, because it changes who has the right to lease, who receives bonus, and how the interest is reported on Form 706.

• Mineral interest (MI) — holds executive rights to lease, receives bonus + delay rentals + royalty
• Royalty interest (RI) — cost-free share of production carved out of a mineral interest
• Non-participating royalty interest (NPRI) — royalty without executive or bonus rights; commonly created by reservation in deed
• Overriding royalty interest (ORRI) — carved out of the working interest; expires with the lease
• Working interest (WI) — cost-bearing; carries plugging and environmental liability; almost always probate-relevant in a different way
• Executive vs. non-executive mineral interest — confirm whether the decedent could lease alone

4. Probate venue — where (and how many times) you have to probate

Mineral interests are real property and pass under the law of the state where they are located, not the state of domicile. Plan ancillary proceedings before filing the primary case.

• Identify every state in which the decedent owned mineral, royalty, NPRI, or ORRI interests
• For each non-domicile state: confirm whether ancillary probate, an ancillary affidavit of heirship, or a domesticated-order procedure is the right vehicle
• For each state: check whether minerals qualify for small-estate / summary administration, and what the dollar threshold is for real-property inclusion
• For TX: evaluate Affidavit of Heirship (Tex. Est. Code § 203.001) vs. Determination of Heirship as a probate-avoidance path
• For OK: evaluate summary administration (58 O.S. § 245) and the determination-of-heirship statute
• For NM: confirm informal vs. formal probate and the 3-year SOL on opening probate
• Confirm any transfer-on-death deeds (TODD) recorded by the decedent in each state — these may avoid probate for the listed minerals entirely

5. Valuation — establish basis and Form 706 inputs

Mineral interests get a step-up in basis to fair market value at date of death under IRC § 1014. Document the methodology contemporaneously; reconstructing valuation years later under IRS examination is materially harder.

• Date-of-death FMV per interest, supported by an income approach using historic and forward-looking production
• Comparable-sales approach as a corroborating method where the basin has observable sales
• Document the valuation methodology in a memorandum that an appraiser would accept
• IRC § 2032 alternate-valuation-date election analysis (6 months after date of death) where price has fallen materially
• IRC § 2032A special-use valuation — exclude unless the mineral interest is appurtenant to qualifying real property in a closely-held farm or ranch use; standalone mineral interests do not qualify
• Cost depletion vs. percentage depletion analysis on the estate’s Form 1041 — the taxpayer computes both and takes the larger under IRC § 613, subject to the § 613A independent-producer / royalty-owner limits; document the comparison contemporaneously

6. Tax filings — estate, fiduciary, and successor reporting

• Form 706 (federal estate tax) — required if gross estate > applicable exclusion; mineral FMV included on Schedule A or F
• State estate / inheritance tax returns where applicable (e.g., MA, NY, OR, WA)
• Form 1041 (estate income tax) — royalty income received between date of death and distribution to beneficiaries
• Schedule K-1 to each beneficiary for distributable net income, including any depletion deduction allocated under Treas. Reg. § 1.611-1(c)(4)
• Confirm IRS Form 8971 / Schedule A basis-reporting compliance for each beneficiary receiving a mineral interest
• Update operator W-9 / payee-information records with the estate’s EIN, then re-update on distribution to each heir

7. Curative — record the conveyance and update payment

A clean record chain is a prerequisite to any future lease, sale, or operator division-order request. Do not leave a probated estate sitting in suspense — operators routinely escheat suspended funds to the state of mineral situs after statutory dormancy.

• Personal representative’s deed of distribution executed and recorded in every county where minerals are located
• Certified copies of letters testamentary / letters of administration recorded with the deed (or under the state’s Muniment of Title statute where applicable)
• New division orders requested from each operator in the name of each successor mineral owner
• Updated payee remit-to address on file with each operator
• Confirm release of any suspended funds and that go-forward payment is correctly allocated
• Update title-opinion and chain-of-title file for each tract for the next attorney

8. Red flags — things that change the workflow

• Suspended royalties for more than 90 days — usually signals an unresolved title or curative defect, not just a clerical issue
• Pooling order pre-dating the decedent’s death with no production history — the unit may be in held-by-production status under a stale lease
• Working-interest ownership — brings plugging and environmental exposure into the estate; coordinate with the operator on JOA and AFE status before distribution
• Multi-state mineral footprint with no prior probate — an unbroken chain of intestate successions can require multiple ancillary cases
• Cognitive-decline period before death with new leases or top leases signed — evaluate capacity and undue-influence challenges before recording the deed of distribution
• Mineral interests held in a defunct family LLC or partnership — entity status with the secretary of state must be cured before distribution
• State unclaimed-property listings under the decedent’s name — file the claim now; statutory escheat clocks restart on death in some states