Intersect of Trust & Estates and Oil & Gas Law: Curative

1. Simon Tolbert – Mountain States Energy Attorneys & Advisors, PLLC d/b/a Tolbert Law Office, PLLC Intersect of Trust & Estates and Oil & Gas Law: Curative stolbert@msenergylaw.com 720.588.8645

2. AGENDA • 1) Introduction to Estate Planning • 2) Intestate Succession Statutes (CO, WY, TX) • 3) Introduction to Probate (CO, WY, TX) • 4) Trust & Estate Intersect with Oil and Gas Law • Top 10 list

3. INTRO TO ESTATE PLANNING • Everything passes by either: 1) Contract; 2) Title or 3) Probate • 4-7 parts to a comprehensive estate plan: • 1) Will/Trust; Declaration of Last Remains; Personal Property Memo (stuff list); Parental Delegation of Power. • 2) Living Will; Medical POA; & Financial POA. • How to create: Test  Necessary formalities + Capacity to create + No undue influence. • Basically, everyone needs a PLAN

4. TERMS & DEFINITIONS“ESTATE” • Heir  a person who is entitled under the statutes of descent and distribution to a part of the estate of a decedent who dies intestate. The term includes the decedent’s surviving spouse. Tex. Estates Code § 22.015; Wyo. Stat. § 2-1-301(a)(xx); C.R.S. § 15-10-201(24) • Devise / Bequest  used as a noun, includes a testamentary disposition of real property, personal property, or both; and (2) used as a verb, means to dispose of real property, personal property, or both, by will. Tex. Estates Code § 22.008; Wyo. Stat. § 2-1-301(a)(x & xi); C.R.S. § 15-10-201(12). • Devisee means a person designated in a will to receive a devise. C.R.S. § 15-1-301(13); Wyo. Stat. § 2-1-301(a)(xii); Tex. Estates Code § 22.009. • Distributee means a person entitled to any property of the decedent under his will or under the statutes of intestate succession. C.R.S. § 15-1-301(15); Wyo. Stat. § 2-1-301(a)(xiii); Tex. Estates Code § 22.010 • Agent  means an attorney in fact under a durable or nondurable power of attorney. C.R.S. § 15-10-201(1).

5. INTESTATACY

6. INTESTATE SUCCESSION • Through time – look at statute at time of Death of Decedent & Title passes at time of Death • Per Stirpes - By stock or root = divide at first at first generation whether any dead or alive. • Per Capita - Count all living descendants (children) without a living parent and divide equally among them. • By Representation - Count heirs at first generation that is a living person (include those dead with live children) and divide equally at that generation. • To Living Children per capita at each generation - Same as by representation, except if there are two or more deceased children at the same generation who leave living children, the shares are re-calculated below that generation. • To Living Children Per Capita - Count all living descendants (children) and give each one equal shares. • Adopted children – statutory right – same rights as natural born children but severs rights from biological parents. Shippey v. Rogers (In re Estate of Kirkpatrick), 77 P.3d 404; • Equitable adoption – common law right – 1) Existence of an agreement by the Parent to adopt Child; 2) Parent gave love and affection; 3) performed parental duties; 4) hold out to public as children. Non-court ordered adoption. No Statutes in place. Child can challenge intestate succession proceeding through estoppel action. Dampier v. Yearn, 493 S.W.3d 118; Barlow v. Barlow, 170 Colo. 465; Sanderson v. Bathrick (In re Estate of Seader), 76 P.3d 1236. • Children born after death (presumption if born during marriage or 300 days after marriage termination) – same as natural born children

7. Per Stirpes

8. Per Capita

9. By Representation

10. To Living Descendants (children) per capita at each generation

11. To Living Children Per Capita

12. COLORADO – C.R.S. § 15-11-102Share of Spouse – After July 1, 2010 • Heirs = Surviving spouse, no descendants , no parents surviving, or all of the descendants surviving descendants also belong to decedent All to Surviving spouse • Heirs = Surviving spouse, no descendants, 1 parent(s) The first $300K, plus 3/4ths of any balance of the intestate estate • Heirs = Surviving spouse, 1+ descendant, 1+ descendant of surviving spouse The first $225K, plus ½ of any balance of the intestate estate • Heirs = Surviving spouse, 1+ descendant not related to surviving spouse The first $150K, plus ½ of any balance of the intestate estate

13. COLORADO – C.R.S. § 15-11-103After July 1, 2010 • To decedent’s descendants per capita at each generation; • If there are no surviving descendant, to decedents' parents equally if both survive, or to the surviving parent if only one survives; • If there is no surviving descendant or parent, to the descendants of the descendants of the decedent’s parents or either of them per capita at each generation;

14. Wyoming Intestate Statute Wyo. Stat. § 2-4-101 • Wyoming is among the minority of states to follow a strict per stirpes pattern of distribution. See In re Estate of Fosler, 13 P.3d 686 (Wyo. 2000).

15. PROBATE

16. POWERS AND DUTIES OF PERSONAL REPRESENTATIVES • Letters Testamentary (appoint powers); pay funeral expenses, preserve testator’s estate, & act as fiduciary

17. PROBATE OF WILLS RELATED TO O&GFormal Process • UPC - Formal or informal administration. Formal – Judge issues court order. Examples: • Determination of the validity of a will. • Appointment of a personal representative, administrator, or special administrator. • Determination of who are the heirs of the decedent. • Validity of a claim against the estate. • Closing the estate and having the personal representative discharged.

18. INFORMAL PROBATE • DEF  Refers to actions of a PR in administering an estate without the need of court approval to perform specific duties (collecting assets, paying expenses & creditors, or distributing property) • Step 1 - Determination if probate is necessary • Step 2 - Determine if there is a valid will • Step 3 - Get a personal representative or administrator appointed • Step 4 - Properly administering the decedent’s assets - winding up the decedent’s personal affairs • Step 5 - Pay bills (notify creditors, tax issues) • Step 6 - Close the estate

19. HOLOGRAPHIC WILLS • DEF  Hand written and signed by testator, no witnesses necessary • TX recognizes  Tex. Estates Code § 251.107 • WY recognizes  Wyo. Stat. § 2-6-113 • CO recognizes  C.R.S. 15-11-502(2)

20. TRUSTS

21. TRUSTS  DEFINITION & TYPES • Basic fiduciary relationship between trustee(s) & beneficiaries – where title is divided between legal and equitable • Types of Express Trusts – intent to create & formalities satisfied • Revocable or Irrevocable • Testamentary or Intervivos • Charitable Trusts • Constructive Trusts

22. TRUSTS – WHAT ARE THEY FOR • Primary Reasons to Use Trusts • Special Needs • Minor Children • Need to Shelter assets from Estate Tax • Secondary Reasons to Use Trusts • Privacy • Probate Avoidance in State of Domicile (as long as it is fully funded) • Multiple State Property Ownership • Need for Advanced Estate Planning

23. MODIFICATION & TERMINATION • Modification of Trusts • Judicial Action Generally needed • Standard  purpose fulfilled, illegal, impossible; or compliance defeats or impairs purposes of the trust • Termination • Judicial Action Sometimes needed • Standard  By Agreement of ALL beneficiaries & no further trust purpose served; and • By Own Terms  specified event

24. POWERS & DUTIES OF TRUSTEES • See Trust Instrument for actual authority • Trustee’s power to lease under Statutes & Court Order • Duty of Loyalty – no self-dealing or commingling • Duty to Act Impartially

25. Specific Scenarios – TOP 10 LIST TRUSTS & ESTATES vs. OIL & GAS

26. NUMBER 10 – MIS CONCEPTIONS ABOUT COST AND TIME • Not that expensive to probate an uncontested proceeding in UPC jurisdictions ($3.5k- $5k approximately) 6 WEEKS TO 6 MONTHS • However, contested proceedings are expensive – YEARS

27. NUMBER 9 - NOT RECORDING LETTERS TESTAMENTARY OR ADMINISTRATION • Mineral owners must show present authority granted from court with jurisdiction to transfer minerals via a PRD

28. NUMBER 8 – MODIFYING OR TERMINATING TRUSTS IS REALLY HARD • Death of Sole or Surviving Trustee  Court appointment of new trustee; or termination/modification of trust • Conveyance by Successor Trustee  see trust instrument or (Hopefully) recitals in the trustee’s deed that names a successor

29. NUMBER 7 – LEASING OIL AND GAS INTERESTS HELD BY TRUST • Agency Law = need actual or apparent authority. Best practice see trust instrument. • Statement of Authority – Prima facie evidence of the existence of an entity and the authority of one or more persons to act on behalf of the entity. C.R.S. 38-30-172; Wyo. Stat. § 17-29-302; Tex. Business Organizations Code § 252.005.

30. NUMBER 6 – TITLELING TRUSTS IN OIL AND GAS LEASES AND IN DEEDS • THE MORE SPECIFIC THE BETTER • X, as trustee, and Y, as successor trustee, of the (revocable/irrevocable name of the trust), dated… for the benefit of B: • For life, then all remaining trust assets distributed to C • For life, and then B’s heirs (per stirpes/capita/by representation)

31. NUMBER 5 – FORGETTING TO FUND THE TRUST • HAPPENS OFTEN • (Sometimes the trust must go through probate again to get funded, and then distributed)

32. NUMBER 4 – SMALL ESTATE AFFIDAVIT DON’T TRANSFER REAL PROPERTY • CO  C.R.S. 15-12-1203 • TX  Value excluding homestead and exempt property does not exceed $75K – Tex. Estates Code § 455.009 • WY  Value of estate does not exceed $200K – Wyo. Stat. § 2-1-201 (Affidavits are used in practice to pass title to mineral property – with qualified witness) • Why?  Need letters (and PRD) for Title

33. NUMBER 3 – INTESTACY LAWS USUALLY LIST AMOUNT SET ASSIDE FOR SURVIVING SPOUSE • Usually applies to amount Family Allowance and Exempt Property Allowance, which must be applied for within 1 year of date of death • How do you value undeveloped minerals?

34. NUMBER 2 – SUSPEND ALL MINERALS REMAINING IN ESTATES • WHY? Who are the lawful heirs? • WHY? Heirs vs. Devisees? (i.e. SOL for Probate)

35. NUMBER 1 – NO AMOUNT OF INTEREST IS TOO SMALL FOR THE KIDS (HEIRS) TO FIGHT OVER • As stated. • i.e. in-laws. • i.e. laughing heirs vs. close loving relationships.

36. QUESTIONS