Many people have contacted us asking about transferring their assets to a trust for estate planning or asset protection purposes. Additionally, because of the existence of mineral leases in place in many residential areas, people are curious about separating surface rights from the mineral estate.
If a transfer is to a trust for estate planning or asset protection purposes, the Texas Property Code protects those transfers, and exempts them from the implications of the "due on sale" clause in deeds or trust used to secure loans on real estate. Under normal circumstances, if a transfer is made of any property upon which a deed of trust acts as mortgage security for a lender, that transfer triggers the due on sale or transfer clause, and absent express consent of the lender, can accelerate the note, and cause all outstanding principal and earned interest to be immediately due and owing. When the transfer is to a qualified trust, the Texas Property Code defines that transfer as a non sale event, thereby protecting the transferor from such acceleration.
However, in recent times, people are interested in separating surface rights from their mineral rights. This is much more difficult to do unless a sale of the property is imminent. The mortgage lien created by a deed of trust normally attaches to any and all ownership rights, in real property and improvements, including any mineral rights in the property. Because the mortgagee holds a security interest in the mineral estate, it will be necessary to obtain a release in order to execute a partition deed for the mineral rights. Many, if not most, lenders will be reluctant to execute such a release, as they have no incentive to do so. However, if a sale is imminent, the standard real estate purchase agreement may include an addendum which retains mineral rights. Under those circumstances, when the property sale is closed, it effects a partition of the surface rights and the minerals rights, and the seller who retains the mineral rights can then execute a transfer of the rights to a trust or LLC for tax and planning advantages after the release of mortgage lien is recorded, satisfying the first mortgage lien.