CONVEYANCE OF DECEDENTS' AND TRUSTS' MINERAL INTERESTS PROBATE PROCEEDINGS - WHAT TO DO WITH A GAP IN TITLE OR MISSING ESTATE

• Jurisdiction: United States

Oil & Gas Mineral Title Examination (Sep 2019)
CHAPTER 6A
CONVEYANCE OF DECEDENTS' AND TRUSTS' MINERAL INTERESTS PROBATE PROCEEDINGS - WHAT TO DO WITH A GAP IN TITLE OR MISSING ESTATE
Leia G. Ursery
Lathrop Gage LLP
Denver, CO

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Leia G. Ursery is a member of the Wealth Strategies Group in the Denver office of Lathrop Gage LLP. Her practice focuses on estate and tax planning, estate and trust administration, protective proceedings, and related litigation. Ms. Ursery is the Immediate-Past Chair of the Executive Council for the Colorado Bar Association - Trust and Estate Section and a prior Chair of the Section's Statutory Revisions Committee and the Orange Book Committee. Additionally, Ms. Ursery serves as a member of the Colorado Bar Association - Legislative Policy Committee. Ms. Ursery was elected as a Fellow of the American College of Trust and Estate Counsel (ACTEC) in October 2017 and was selected as a Colorado Super Lawyer - Rising Star between 2010 and 2015 and as a Colorado Super Lawyer since 2016 in the area of Estate Planning & Probate. Ms. Ursery serves as an adjunct professor at both the University of Denver Sturm College of Law (probate practicum) and the University of Colorado - Denver (estate and gift taxation). She received her Juris Doctor and Master of Law (Taxation) from the University of Denver Sturm College of Law. Ms. Ursery concentrates her volunteer efforts within the community by serving as a frequent volunteer for the Pro Se Clinic at the Denver Probate Court and for the Wills Lab Clinic and the Tribal Wills Program provided through the University of Denver Sturm College of Law.

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Overview of Applicable Codes

In 1969, the Uniform Probate Code was approved and recommended for enactment by the Uniform Law Commission.¹ The goal of the Uniform Probate Code is to promote efficiency and continuity with respect to the transfer of property regardless of where a person resides at his or her death. The Uniform Probate Code has only been adopted in whole or in part by eighteen states.² Colorado progressively adopted its own version of the Uniform Probate Code in 1973 and it can presently be found under C.R.S. §§ 15-10-101 through 15-17-103. While the Colorado Probate Code applies to a variety of matters, the following materials focus on the provisions of the Colorado Probate Code that affect decedents who are domiciled in Colorado, regardless of where their property is located, and decedents who are domiciled outside of Colorado but who own property located in Colorado.³

In Colorado, we are fortunate that our probate system is fairly streamlined and easy to navigate. However, in the thirty-two states where the Uniform Probate Code has not been adopted, either in whole or in part, the probate process can be burdensome and expensive. Accordingly, trust planning is often utilized as part of an overall estate plan to avoid triggering a probate proceeding upon death. Historically, the law governing trusts in Colorado was extremely limited. This changed upon the enactment of the Colorado Uniform Trust Code on January 1, 2019; such provisions can be found under C.R.S. §§ 15-5-101 through 15-5-1404.⁴ The provisions of the Colorado Uniform Trust Code applies to most trusts created before, on or after January 1, 2019.⁵

Background: Testate Succession vs. Intestate Succession

Upon death, the disposition of property titled in an individual's name, alone and without a paid-on-death or transfer-on-death designation, will be governed by the laws of testate and/or intestate succession.

If a decedent leaves a valid will, the decedent's property will pass in accordance with testate succession. A will includes one or more testamentary instruments wherein an individual "appoints an executor, revokes or revises another will,... or expressly excludes or limits the right of an individual or class to succeed to property of the [individual] passing by intestate succession."⁶ In other words, a will identifies the person(s) and/or organization(s) who will receive the decedent's property upon death; additionally, a will generally nominates the person(s) or institution who will serve as personal representative and be responsible for administering the decedent's estate. The individual executing the will must be at least eighteen (18) years old and be of sound mind at the

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time the will is signed.⁷ A person will be considered as having sound mind if he or she "(1) understands the nature of the act, (2) knows the extent of his or her property, (3) understands the proposed testamentary disposition, and (4) knows the natural objects of his or her bounty, and (5) the will represents the person's wishes."⁸ Finally, a will is considered to be self-proving if it is attested by two witnesses and acknowledged before a notary public.⁹

If a decedent does not leave a valid will, the decedent's property passes to his or her heirs in accordance with the laws of intestate succession.¹⁰ Additionally, the laws of intestate succession may apply even if a valid will exists if any property is not effectively disposed of by the terms of such will.¹¹ To the extent a decedent's heirs cannot be determined, the decedent's property passes to the State of Colorado;¹² however, with the availability of online research tools, this situation does not occur frequently.

Contrary to the belief of many, a surviving spouse is not always the sole heir of a decedent's estate. The intestate share of a surviving spouse will depend on whether the decedent is survived by one or both parents and whether the decedent has descendants that are not also descendants of the surviving spouse.¹³ The following chart reflects the intestate share of a surviving spouse under various situations under C.R.S. § 15-11-102:

No descendent or parent survives the decedent	Surviving spouse receives the entire intestate estate	C.R.S. § 15-11-102(1)(a)
All of the decedent's surviving descendants are also descendants of the surviving spouse	Surviving spouse receives the entire intestate estate	C.R.S. § 15-11-102(1)(b)
No living descendant of the decedent but at least one of the decedent's parents is still living	Surviving spouse receives the first $300,000.00 of the intestate estate, plus three-fourths (3/4) of the remaining intestate estate	C.R.S. § 15-11-102(2)
All of the decedent's surviving descendants are also descendants of the surviving spouse but the surviving spouse has other descendants that are not descendants of the decedent	Surviving spouse receives the first $225,000.00 of the intestate estate, plus one-half (1/2) of the remaining intestate estate	C.R.S. § 15-11-102(3)
One or more of the decedent's surviving descendants are not a descendant of the surviving spouse	Surviving spouse receives the first $150,000.00 of the intestate estate, plus one-half (1/2) of the remaining intestate estate	C.R.S. § 15-11-102(4)

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With respect to any share of the decedent's intestate estate that does not pass to a surviving spouse, the following distribution provisions apply:

Decedent's descendants per capita at each generation	C.R.S. § 15-11-103(2)
Then-living parent(s) in equal shares (if no surviving descendant of the decedent)	C.R.S. § 15-11-103(3)
Descendants of decedent's parents per capita at each generation (if no surviving descendant or parent of the decedent)	C.R.S. § 15-11-103(4)
One-half (1/2) to decedent's paternal grandparent(s), or their respective then-living descendants per capita at each generation, and one-half (1/2) to decedent's maternal grandparent(s), or their respective then-living descendants per capita at each generation (if no surviving descendant or parent of the decedent or descendant of decedent's parents)	C.R.S. § 15-11-103(5)

Several provisions can modify the foregoing. For example, a parent may be barred for receiving an intestate share of the decedent's estate if the parent's rights have been terminated or, if such rights could have been terminated if the decedent is a child who has not already attained the age of eighteen (18) years.¹⁴ Additionally, one should be cognizant that there are very specific

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rules governing the intestate shares of adopted children and children born through assisted reproduction or gestational carriers.¹⁵

Any family member who is related by half-blood to the decedent will inherit as if he or she were related to the decedent by whole blood.¹⁶ Moreover, to the extent a family member is related to the decedent by way of two separate blood lines, he or she shall receive a single intestate share based on the larger share available to him or her.¹⁷

Another consideration is whether decedent was a party to a designated beneficiary agreement executed in accordance with C.R.S. §§ 15-22-101 et seq. If so, a surviving designated beneficiary will receive an intestate share of the estate.¹⁸

If a decedent dies with mineral interests in his or her name alone, without a joint owner, careful consideration must be made to ensure that such interests are distributed to the appropriate devisees under the decedent's will (if any) or to the decedent's intestate heirs. Unless the mineral interests are specifically devised to a single person or organization under the will or unless there is a single heir of the intestate estate, the mineral interests will need to be divided into smaller fractional or percentage shares. To further complicate this process, if satisfaction of a specific dollar distribution is required by a decedent's will or the applicable intestate law, an appraisal of the mineral interests must be obtained to determine what partial interest may be needed for this purpose. Finally, if a surviving spouse elects to take a share of the augmented estate¹⁹ or if a surviving spouse or a dependent child asserts a claim for the statutory exempt property and family allowances,²⁰ care must be taken to sure that the mineral interests are conveyed to those...