The Bamberger Blog » Estate Planning and Personal Services

Assessors Must Tell-All Concerning Your Oil and Gas Interests

kjewell — Fri, 26 Aug 2011 13:30:56 +0000

New Law Releases Confidential Information Concerning Oil and Gas Lease Production and Ownership

Prior to July 1 of this year, Indiana Code provided that all information related to earnings, income, profits, losses, or expenditures given to an assessing official is confidential. This confidential information included earnings, income, profits, losses, and expenditures related to production of oil and gas. This oil and gas production information is—and continues to be—reported to the assessing officials on a form called a Form G&O-1 by the purchaser of the mineral. This form aids the assessor in determining the total taxes due and owing on producing oil and gas leases. The form includes information concerning a lease’s percentages of ownership and productivity. It also includes the names and addresses of those with an interest in the leasehold. Prior to July 1, the G&O-1 was a confidential document not subject to disclosure to the general public. It is no longer confidential.

The problem with the general prohibition against disclosure of financial information relating to production of an oil and gas lease was that it made it very difficult for potential tax sale purchasers to measure the value of such interest. Unlike surface real estate, the value and production potential of an oil and gas lease are difficult to determinate without information that is usually unavailable to the public. While a city lot to be sold at tax sale can be visually inspected and appraised prior to the sale, a potential purchaser of an oil and gas interest usually does not have that luxury. The critical information needed for valuing an interest– production history and future production potential– is rarely available to the public. Many potential tax sale purchasers are unwilling to take such an uncalculated risk.

The result is that counties inSouthwestern Indianaoften had difficulty in disposing of oil and gas interests on which taxes were delinquent. The interests remain unproductive, which means that they did not generate income for producers or property taxes for the public.

Presumably, the new law relaxing the confidentiality of this information was passed to resolve this problem. It provides,

“Confidential information concerning an oil or gas interest . . . may be disclosed by an assessing official if the interest has been listed on the delinquent property tax list . . . and is not otherwise removed from the property tax sale . . . . A person who establishes that the person may bid on an oil or gas interest in the context of a property tax sale may request from an assessing official all information necessary to properly identify and determine the value of the gas or oil interest that is the subject of the property tax sale. The information that may be disclosed includes the following:

(1) Lease information.

(2) The type of property interest being sold.

(3) The applicable percentage interest and the allocation of the applicable percentage interest among the owners of the oil or gas interest (including the names and addresses of all owners).”

The apparent purpose of this new law was to lift the prohibition against disclosure as it relates to oil and gas interests on the delinquent tax list. It was not intended for the release of information concerning earnings, income, profits, losses, and expenditures for other oil and gas interests. Those owners current on their property taxes arising from their oil and gas interests should remain protected from the disclosure of such information.

As practical matter, the new law creates an immediate problem for assessing officials. Interests in oil and gas leases are almost always fractionalized. Multiple individuals or businesses often undivided interests in an oil and gas lease. The Form O&G-1 contains information related not only to those interested holders in a lease with delinquent taxes, but every other interest holder as well. How does an assessing official make a disclosure of earnings, income, profits, losses and expenditures for an oil and gas interest on the delinquent tax list, while protecting the same information for the remaining fractional interests that are not on such list?

As of August 22, based on its interpretation of the Indiana Public Access Counselor’s Advisory Opinion dated August 17, 2011, the Indiana Department of Local Government Finance Assessment Division Director has taken the position that assessing officials must turn over all of the information contained in the Form O&G-1—including production information, names and addresses of interest holders, and applicable percentages of ownership. This complete disclosure must be made upon request if any of the interest holders on the lease has delinquent taxes related to that lease.

This means that if a person owns a fractional interest in an oil and gas lease along with 50 other interest holders, and just one of those interest holders fails to make timely payment of taxes, any information contained in the Form O&G-1 is available for public consumption—including your percentage of ownership, the production figures of the lease, and the person’s name and address.

The new law makes valuable information available to oil and gas producers and prospective tax sale purchasers. If craftily used, it can also provide a competitive advantage to oil and gas prospectors in the area who can analyze and apply this information. Presumably, more oil and gas leasehold interests will be purchased at tax sales by eager producers who will generate income and property taxes.

But the drawbacks are considerable. Assessing officials are already being inundated with requests for volumes of O&G-1 forms, creating an administrative burden and expense for the counties. But more importantly, the new law severely erodes the privacy that a person had in his or her financial information in an oil and gas lease.

Estate Planning for Vacationers

kjewell — Thu, 02 Jun 2011 13:30:23 +0000

Summer break has finally arrived! The sun is warm, and the kids are out of school. It’s time to go on vacation (or so says my family!).

Many of us will head out of town this summer to take a much needed respite from work and life’s normal activities. Before leaving town, you should consider whether your estate planning affairs are in order. This includes not only having a current Will or Trust in place (you know, just in case the bungee jumping adventure doesn’t go as planned!), but also includes the following less obvious concerns:

Advance Health Care Directives (such as a Health Care Power of Attorney and Living Will Declaration) – Do you have these directives? If not, now is the time. If you already have them in place, be sure to take a copy with you in case you need it while away from home.
Health Care Delegation – Are you the primary health care decision-maker for loved ones, such as minor children who are staying at grandma’s house while you vacation (thank goodness for grandparents!)? Are you the primary health care decision-maker for your elderly parents? If the answer to either of these questions is yes, you should consider temporarily delegating (giving) this authority to someone else in case a medical decision needs to be made in your absence.
Power of Attorney – Is there unfinished business left to do at home, such as paying bills, or selling some property? If so, you may need to give someone legal authority to take care of those matters while you are enjoying your vacation.
Business Owners – Is there someone in the office who has authority to sign checks, file tax forms, and deal with important time-sensitive matters? If not, you should take steps before you leave to make sure your business continues without interruption while you are away from the office.

Take some time before leaving on vacation to make sure your estate planning affairs are in order. Your vacation will be much more enjoyable if you take steps to ensure that these and other important matters are taken care of before leaving town. Bon voyage!

Author: D. Andrew Nestrick (bio)
Phone: 812.452-3510
email: anestrick@bamberger.com

What is a Durable General Power of Attorney?

kjewell — Thu, 05 May 2011 13:30:49 +0000

When thinking of estate planning, many people give lots of thought as to what should happen to their assets when they die. Individuals often fail to ponder the important topic of who should manage assets if incapacity occurs while they are living. The document whereby one can name person(s) or professional(s) to manage assets in the event of incapacity is a Durable General Power of Attorney.

This document is an important part of every estate plan. If an individual becomes incapacitated without this document, it can result in the need to establish a guardianship. A guardianship requires the preparation and filing of documents and appearing in court and is far more costly and time-consuming than the preparation of a Durable General Power of Attorney.

It is also important to ensure that the Durable General Power of Attorney contains appropriate powers and/or limitations of powers based on the particular facts of each case. For more information about Durable General Powers of Attorney, review of Durable General Powers of Attorney, or estate planning generally, please contact a member of Bamberger’s Personal Services Group.

Author: Lindsay B. Schmitt (bio)
Phone: 812.452.3570
email: lschmitt@bamberger.com

A Caution About Deed Forms in Real Estate Purchases

kjewell — Wed, 02 Mar 2011 13:30:07 +0000

Usual practice calls for a purchaser of real estate to get a warranty deed at closing. When a deed recites that the seller “conveys and warrants” the property to the buyer, if there is a problem with the title or right of possession after the closing, the seller has to make it good, except as to any problem or encumbrance identified in the deed and excluded from the operation of the warranties. This gives the buyer a claim against a seller for any problems with the title to the real estate that were not revealed by the title insurance commitment or other title search, or even if no title search or title insurance commitment was obtained (which is a bad idea for any purchaser, but that is another article).

But a word of caution about acquiring property from an estate or a trust. Frequently after the sale or distribution of the real estate, an estate or a trust will distribute its assets to its beneficiaries and will close. In order to provide finality to the termination of a trust or the closing of an estate, the form of deed given by a personal representative or a trustee simply calls for the seller to “convey” as opposed to “convey and warrant” the property. This means that the estate or trust, as the case may be, makes no warranty whatsoever of the title conveyed.

This provides two different areas of concern, depending upon the circumstances under which the deed was delivered. In the case of a beneficiary acquiring title on distribution of the estate or trust, this form of deed simply means that that beneficiary will receive all but only the interest that the estate or trust had – be that an undivided one-fourth interest, title to the real estate but with a large power company easement running through the middle of it, or with whatever other defect affected the owner of the property when he put the property in his trust or when he passed away. The beneficiary of an estate should not assume that title received is a good and marketable title, or that it will permit any particular use on the property after distribution. Additional title search is essential before the beneficiary receiving the property invests in improving the property or otherwise acts in reliance upon having good title.

A similar situation is involved when a person purchases real estate from an estate or trust. Just like with the beneficiary of the estate or trust, the purchaser gets a personal representative’s deed or a trustee’s deed without warranty. Again, all the buyer gets is whatever the trust or estate owned. This makes it even more important than usual that a title search made and title insurance acquired (and survey work to determine encroachments and locations of encumbrances) before purchase of real estate. The attorney coordinating the purchase of the real estate for you will be aware of these things, but if you are not using an attorney there is likely no one in the transaction that will point out this potential pitfall. Be alert.

Author: Frederick R. Folz (bio)
Phone: 812.452.3504
email: ffolz@bamberger.com

How the Tax Relief Act of 2010 Affects Estate Planning

kjewell — Mon, 20 Dec 2010 20:44:43 +0000

On 12/16/10, Congress passed the Tax Relief Act of 2010, which will change estate planning for countless numbers of people across the country. Now that the tax bill has passed, following is a list of the changes that have gone into effect:

The new plan will lower estate and GST taxes for 2011 and 2012 by increasing the exemption amount (technically, the applicable exclusion amount) from $1 million to $5 million (as indexed after 2011) and reducing the top tax rate from 55% to 35%.
Estates of decedents dying in 2010 can choose between (1) estate tax (based on a $5 million exemption and 35% top rate) and a step-up in basis or (2) no estate tax and modified carryover basis. In technical terms, the act achieves this choice by making the estate tax and basis changes effective retroactively for estates of decedents dying after 2009 but allowing the opt-out choice for estates of decedents dying in 2010.
For gifts made after December 31, 2010, the act reunifies the gift tax with the estate tax, with an applicable exclusion amount of $5 million and a top estate and gift tax rate of 35%.
The changes provide that the GST tax exemption for decedents dying or gifts made after December 31, 2009 is equal to the applicable exclusion amount for estate tax purposes (e.g., $5 million for 2010). Therefore, up to $5 million in GST tax exemption may be allocated to a trust created or funded during 2010. Although the GST tax is applicable in 2010, the GST tax rate for transfers made during 2010 is 0%. The GST tax rate for transfers made in 2011 and 2012 will be 35%.
For a decedent dying after December 31, 2009, and before the enactment date, the act provides that the due date for actions (e.g., filing an estate tax return) is not to be earlier than the date that’s nine months after the enactment date.
Effective for estates of decedents dying after December 31, 2010, the changes allow the executor of a deceased spouse’s estate to transfer any unused estate tax exemption to the surviving spouse.

Based on these new changes, it is important for everyone to review estate plans to make the proper changes to plan for the future.

Also, if you have not reviewed your estate planning documents in a while, now is a perfect time to review them with your attorney, regardless of the amount of the estate.

Please contact your Bamberger attorney to schedule an appointment so your estate planning documents can be reviewed.

Author: John Stuff Staser (bio)
Phone: 812.452-3549
email: sstaser@bamberger.com

Bamberger Seminar – Protecting Your Business by Succession Planning

kjewell — Wed, 18 Aug 2010 14:17:22 +0000

Join the attorneys at Bamberger for a complimentary two-hour seminar designed to walk you through the details of business succession planning. The seminar will be held on Thursday, September 9, 2010 with two times available – 9:00-11:00 am or 1:00-3:00 pm.

You have worked hard to build your business. Protecting its value for the future is essential, whether you’re planning for eventual retirement, transferring your business to a family member, management team or your employees, or even a future outright sale of your company.

We’ll walk you through legal definitions and tips, explain the reasoning behind the need for legal as well as business planning, and show you how to get started. Joining our attorneys will be guest speaker Van Olson to offer his insight on Employee Stock Ownership Plans (ESOP).

The seminar will be held at the Bamberger Conference Center on the 10th floor in the Hulman Building. If you’d like to attend this informative seminar, please RSVP by Thursday, September 2, 2010 by calling 812.452.3567 or email us at rsvp@bamberger.com. Seating is limited. Please let us know which time you would prefer to attend.

Author: Kim Jewell (bio)
Phone: 812.452.3588
email: kjewell@bamberger.com

DISAPPEARING NOTARIES

thartmann — Mon, 02 Aug 2010 16:36:03 +0000

A recent article in the Indianapolis Business Journal noted a shocking decline in the number of notaries in Indiana in the last few years. In years past, a notary public stamp on a document seemed to be ever present and often was the distinguishing characteristic of a document with high importance. However, in 2007, the Indiana Secretary of State’s office noted almost 23,000 expirations, but only approximately 17,000 renewals or applications for new notaries. This marked a 22% decline for 2007. In 2009 the decline accelerated to 30%. This year the decline to-date is 41%. The chief legal counsel for the Indiana Secretary of State indicates that he believes the decline reflects that the type of authentication notaries do is falling out of fashion. Many companies now accept photo I.D. or confirm over the telephone or Internet. He indicated that notary publics were more popular in the days when companies and people relied heavily on postal mail. However with the increase in multiple forms of personal communication being available, the mail is not the exclusive source to authenticate the identity of someone’s signature on a document. If you have questions about notaries in Indiana, contact a Bamberger attorney.

Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com

Probate — More Than a Four Letter Word (Seven Actually)

kjewell — Thu, 08 Jul 2010 13:43:50 +0000

“Probate,” as defined by the Merriam–Webster dictionary is “the judicial determination of the validity of a Will.” Under the laws of England, as transplanted to America, “probate law” refers to the body of law that has developed, both through statutes and court cases, governing the transfer of property at death and the proper handling of property that is held in a fiduciary capacity for the benefit of others.

In modern usage, most people have come to associate “probate” with court proceedings related to the transfer of property at death. Many have concerns about such court proceedings, including cost, delay, publicity, and uncertainty. Some of these concerns are justified, and others are exaggerated.

In America, each of us may own and control our own property, and that includes the legal right to designate how and to whom our property is to be transferred at our death (subject to certain limitations such as rights of creditors and payment of death taxes if applicable). This is a treasured legal right. Laws have developed to make sure this legal right to transfer our property at death is protected, and that the rights of persons designated to receive property at death are protected. We can all cite instances in which the assistance of a court has been necessary to protect these rights, but most of the time such assistance is not needed from a court, even though some coordination and supervision of the process is almost always needed.

In fact, there are many methods to transfer property at death under modern law, including the use of revocable trusts, wills, beneficiary designations, pay on death and transfer on death registrations, and joint tenancies with rights of survivorship. The objective today is to choose and properly coordinate the best methods to obtain the desired result in the most efficient manner.

The attorneys of the Personal Services Group at Bamberger are experienced in helping our clients identify the best method or methods to choose and implement to accomplish their estate planning objectives.

Author: John P. Broadhead (bio)
Phone: 812.452-3577
email: jbroadhead@bamberger.com

Why Do I Need to Have an Estate Plan?

kjewell — Mon, 10 May 2010 13:36:35 +0000

Many people believe that because their estates are not subject to death taxes there is no reason to do estate planning. Actually, taxes are just one consideration for estate planning and may not be the most important reason. Whereas, family protection is the primary consideration in meeting most estate planning objectives.

Some other reasons include: protecting a spouse, ensuring that minor children are protected, remarriage protection, planning for the succession of business ownership, Medicaid planning, paying for nursing home care, avoiding probate, creditor and asset protection, lifetime protection planning, providing for gifts to charities and non-family members; and the reasons go on and on.

Oh, yes, there is also the tax reason for planning. Right now there is no federal estate tax but in 2011 it will be reinstituted. It may be reinstituted in 2010. There is also the other tax. Indiana has an inheritance tax and it can be substantial if proper planning is not done.

So you see, there are reasons for estate planning other than just taxes. Everyone should have his/her personal situation evaluated to determine what appropriate life time and estate plan best meets the person’s needs.

Author: John Stuff Staser (bio)
Phone: 812.452-3549
email: sstaser@bamberger.com

Notice: Change in Bamberger Blog Subscription Provider

kjewell — Wed, 21 Apr 2010 19:36:11 +0000

As the Bamberger Blog subscriber list continues to grow, we have decided to upgrade our Blog’s email and RSS service from Google Feedburner to the more enhanced Google FeedBlitz.

The new service will allow us more options in terms of creative content, better reach and SEO components and more ways that our subscribers can choose from with regards to delivery options. We hope you will enjoy the expanded capabilities.

For those of you who subscribe to our blog by RSS feed, you will want to update your feed by going to our subscription page to update with the latest FeedBlitz URL addresses.

For our existing email subscribers, the only change you might notice is the address which sends you the news alerts, if you are receiving them by email. Otherwise you shouldn’t see any changes at all. Same great news articles, same great legal service.

Author: Kim Jewell (bio)
Phone: 812.452.3588
email: kjewell@bamberger.com