What to Do When You Inherit Mineral Rights in Texas

This article is provided for informational purposes only and should not be construed as legal or tax advice. Always consult a qualified Texas attorney and a CPA for your specific situation.

Inheriting mineral rights in Texas is common, and it almost always comes with paperwork. Royalty checks may stop, letters may arrive from operators and buyers, and the county deed records still show the decedent as the owner. This article walks through what a Texas heir actually needs to do: figure out what was inherited, clear title, notify the operator, establish a date-of-death valuation for tax purposes, and understand the taxes that come with ownership.

Texas treats mineral rights as real property. That one fact drives most of what follows. Title has to be cleared in the county where the minerals are located, not where the person who died lived, and operators will typically not redirect royalty payments until the chain of title is documented.

Figure Out What You Own

Before doing anything else, read the will and any older deeds carefully. In Texas, “mineral rights” can mean several different things, and it matters which one was passed down.

  • Mineral fee (or mineral interest). The full bundle: the right to lease, receive lease bonus, collect royalty, and participate in development decisions. This is what most people picture when they hear “mineral rights.”
  • Non-participating royalty interest (NPRI). A share of royalty only. No right to lease, no bonus, no say in development. NPRIs often show up in older family deeds where one generation carved off a royalty share but kept the rest.
  • Wellbore-only or term interest. A narrower interest limited to a specific well or a specific period. Less common, but it happens.

The type of interest affects everything downstream, from how the operator pays you to what you can do next. Our article on Mineral Rights 101 covers the basics.

Minerals can sit in multiple counties, and often multiple states. A single family might own fractional interests across half a dozen Texas counties and maybe Oklahoma or New Mexico too. Each county’s deed records have to be updated separately. If the decedent had mineral interests outside Texas, those will need to be handled under that state’s law, not Texas law.

Reading the Decedent’s Check Stubs

One of the best ways to understand what was inherited is to find the decedent’s most recent royalty check stubs (sometimes called revenue statements or royalty detail). Each stub tells you which wells are producing, what the decedent was being paid, and what operator is involved.

Most operator check stubs include:

  • Property or lease name and the well name or API number for each producing well
  • Product type: oil (sometimes labeled “OIL” or “COND” for condensate), gas (“GAS”), or natural gas liquids (“NGL”)
  • Production month: the calendar month when the oil or gas was actually produced, which is typically one to three months before the check date
  • Volume: the quantity produced, measured in barrels (BBL) for oil and thousands of cubic feet (MCF) for gas
  • Price: the per-unit price the operator received when it sold the product
  • Gross value: volume times price
  • Deductions: amounts subtracted before the owner’s share is calculated, typically including severance tax, transportation, gathering, compression, and processing fees
  • Owner decimal interest (DOI): the heir’s fractional share of the well’s revenue, calculated from the net mineral acreage in the drilling unit multiplied by the royalty rate in the lease. Our article on Understanding Royalty Checks explains how this calculation works and breaks down the formula
  • Net revenue: the amount actually paid to the owner for that well and product in that production month

Some operators deliver check stubs by mail; others post them electronically through portals like EnergyLink. If the decedent received royalty statements electronically, check their email for portal notifications or account links. If no recent stubs can be found, contact the operator’s owner relations department and request a payment history (sometimes called a “revenue run”) going back at least twelve months. This history is also useful for the date-of-death valuation, since it gives the appraiser actual production and pricing data to work from.

Clear Title

Until title is cleared, the operator will typically refuse to pay you, and any future sale or lease will likely run into problems. Texas gives heirs several ways to do this. Which one fits depends on whether there is a will, how long ago the person died, whether the estate has debts, and how willing the operator (or a future title examiner) is to accept less formal proof.

If There Is a Will

Independent administration is the most common path in Texas when a valid will exists. The court admits the will, appoints an independent executor, and then lets the executor administer the estate with minimal court supervision. This is governed by Chapters 401 through 404 of the Texas Estates Code. The executor eventually records letters testamentary and any distribution deeds in the county deed records where the minerals sit.

Muniment of title is a streamlined option unique to Texas. If the decedent left a valid will, the estate has no unpaid debts other than those secured by real property, and there is no need for a full administration, a Texas court can admit the will solely as a “muniment of title.” No executor is appointed.

The certified order admitting the will, together with the will itself, is then recorded in the county deed records and serves as the document that transfers title. This is governed by Chapter 257 of the Texas Estates Code. For straightforward estates whose main asset is real property or minerals, muniment of title is often the cheapest and fastest option.

The four-year deadline matters. Under Texas Estates Code section 256.003, a will generally must be offered for probate within four years of the testator’s death. After four years, the will is barred except in narrow circumstances where the applicant was not “in default” in failing to present it sooner. Families that sit on a will for a decade will usually end up in a determination of heirship instead.

If There Is No Will

Intestate succession under Chapter 201 of the Texas Estates Code decides who inherits when there is no will. The rules differ depending on whether the property is community property or separate property, and whether the decedent left a spouse, children, or both. Inherited minerals, whether under a will or intestate, are generally the recipient’s separate property even if received during marriage.

Affidavit of heirship is a common, extrajudicial tool for establishing title to Texas real property when there is no will. Two disinterested witnesses (meaning people who knew the decedent and family but have no financial interest in the estate) sign a sworn statement identifying the heirs and their shares. The affidavit is filed in the deed records of the county where the minerals are located.

Under Chapter 203 of the Texas Estates Code, the recorded affidavit becomes prima facie evidence of the facts stated in it after five years on record. Some operators will accept a properly drafted affidavit of heirship immediately; others will require a formal heirship proceeding, especially for larger interests or complicated families.

Determination of heirship is the court version of establishing who inherits. “Heirship” here simply means the legal process of identifying and confirming the decedent’s heirs. Under Chapter 202 of the Texas Estates Code, an heir, creditor, or other interested party asks a Texas probate court to issue a binding judgment identifying the decedent’s legal heirs and their shares. The court appoints an attorney ad litem to represent any unknown heirs. The resulting judgment is recorded in the deed records. A formal determination is slower and more expensive than an affidavit, but it produces a result that any operator, title examiner, or buyer will accept.

Small estate affidavit exists under Chapter 205 of the Texas Estates Code, but it is generally a poor fit for mineral interests. The statute is oriented toward personal property and has an estate-value cap. Most title examiners and operators will typically not accept a small estate affidavit as proof of title for mineral real property.

TexasLawHelp, a free service run by the Texas Access to Justice Foundation, has plain-language guides on probate and wills, affidavits of heirship and transferring property after death, and applications to determine heirship.

Record the Document in the County Where the Minerals Are

Whatever route is used, the final step is recording the operative document (letters testamentary, muniment order, affidavit of heirship, or heirship judgment) in the county clerk’s deed records for the county where the minerals sit. Texas Property Code section 13.001 makes recording the mechanism that gives constructive notice to the world. An unrecorded document may be valid between family members but will generally not hold up against operators, lenders, and future buyers.

If the decedent was domiciled outside Texas, the Texas county still controls for Texas minerals. Often this means an “ancillary” filing in Texas based on the out-of-state probate, or skipping straight to a Texas muniment of title or heirship proceeding.

Sometimes It Makes Sense to Sell from the Estate

If the heirs do not want to keep the mineral rights, the executor can sometimes sell them directly out of the estate before distribution, which can simplify matters. Instead of clearing title into multiple heirs’ names, negotiating among siblings, and then selling, the executor handles the sale as part of the administration. The proceeds are then distributed to the heirs according to the will or intestacy rules.

This approach is typically simpler when there are multiple heirs who would otherwise each need to sign a conveyance, or when the mineral interest is small and the ongoing administrative burden (tracking royalties, filing taxes, managing lease obligations) outweighs the income. The executor generally needs authority under the will or court approval to sell estate assets, and the sale should be at fair market value. A CPA should be involved, since the tax treatment of a sale by the estate versus a sale by individual heirs can differ. This is a conversation to have with the estate attorney early in the process.

Notify Operators and Taxing Authorities

Recording a document in the county deed records puts the public on constructive notice, but it does not by itself tell an operator or a tax office to change how they route payments and bills. The heir has to reach out directly. Below is a practical list of who to notify and what to send each one.

Operators and Purchasers

Figure out who is currently paying royalty on each inherited interest. The most recent royalty check stubs, 1099-MISC forms, or bank statements from the decedent will show the payor name. If no recent check stubs are available, try these:

  • The county appraisal district (CAD) website for the county where the minerals are located. If the property is producing, the CAD’s mineral appraisal records will typically list the operator, the lease name, and the division of interest.
  • The Texas Railroad Commission’s Public GIS Viewer, which can identify the operator of record by lease or survey.
  • If the property is not currently producing, look for an existing lease or lease bonus receipt in the decedent’s records. The lessee named on the lease (or its assignee) is typically the party who would operate or authorize operations.

Contact each operator’s division order or owner relations department and send:

  • A certified copy of the death certificate
  • A copy of the recorded probate order, muniment order, affidavit of heirship, or heirship judgment
  • A completed IRS Form W-9 under the heir’s Social Security number or EIN
  • Updated mailing address and, if offered, direct deposit information
  • A cover letter listing the decedent’s owner number (usually printed on old check stubs), the wells or leases covered, and the heir’s contact information

Most operators have an owner relations portal, a mailing address, and an email inbox dedicated to ownership changes. Use whichever the operator prefers. Keep copies of everything sent, including certified mail receipts.

Expect a period of suspense. Most leases give the operator roughly 30 to 60 days to process an ownership change before transferring the interest. Under Texas Natural Resources Code section 91.402, a payor may also withhold payment when there is a dispute concerning title or a reasonable doubt about who is entitled to payment. Unresolved heirship qualifies. Once the operator’s title department processes the paperwork, accumulated suspended royalty is typically paid out with the next regular check.

After the operator updates its records, it will send a new division order reflecting the heir’s decimal interest. The heir reviews and signs. Our Division Orders 101 article explains what division orders do and do not do, and what to watch for before signing.

County Appraisal District (CAD)

Each Texas county that taxes a producing mineral interest is administered by a county appraisal district. The CAD is the office that sends the annual property tax bill on the minerals. Recording a document in the county clerk’s office does not automatically update the CAD’s ownership rolls. Call or email each CAD directly and send:

  • A copy of the recorded probate, muniment, or heirship document
  • The decedent’s CAD account number or the property description (usually from a prior tax bill or the CAD’s online search)
  • The heir’s name, mailing address, and ownership percentage

If this step is skipped, tax bills keep going to the decedent’s last address and can become delinquent without the heir ever seeing them. Delinquent ad valorem taxes accrue penalties and interest and can eventually result in a tax lien on the mineral interest.

Texas Comptroller (for Unclaimed or Escheated Royalty)

If the decedent’s mineral account was dormant for several years before death, royalty may already have been reported to the Texas Comptroller as unclaimed property. Search the free Texas Unclaimed Property database under the decedent’s name and any prior addresses. Funds can be claimed by the heir with appropriate supporting documents.

IRS and Estate Tax (When Applicable)

Most mineral-owning estates fall well below the federal estate tax filing threshold, which is $13.99 million per individual for 2025, and owe no federal estate tax. For larger estates that do file Form 706 (the federal estate tax return), the executor reports mineral interests at their date-of-death fair market value. If the estate is large enough to require a Form 706, you need an estate attorney. Even when no Form 706 is filed, the date-of-death valuation still matters for the heir’s future income tax calculations, which brings us to the next section.

Establish Your Tax Basis

This step is easy to skip and often regretted later. Under Internal Revenue Code section 1014, inherited property generally receives a stepped-up basis equal to fair market value on the date of the decedent’s death (or the alternate valuation date, if the estate elected one). The step-up replaces whatever the decedent originally paid with the current market value, which can erase decades of appreciation from any future tax bill. IRS Publication 559 covers the basis rules for inherited property, and Publication 551 covers basis in more depth.

Why a higher basis benefits the heir. The basis is the starting line for two different tax calculations:

  1. Cost depletion on future royalty income. Every year the heir receives royalty, they can claim a cost depletion deduction that recovers a portion of their basis (depletion is reported on Schedule E and governed by IRC section 611 and following sections). A higher starting basis means more depletion deductions over the life of the interest, which directly reduces taxable income from royalties. (An heir may also choose percentage depletion if it produces a larger deduction in any given year, but cost depletion is tied to the basis.)
  2. Capital gains on a future sale. If the heir ever sells the mineral interest, the taxable gain is the sale price minus the remaining basis. A higher basis means a smaller gain and less tax.

How the Valuation Works

For producing mineral interests, fair market value is typically established through a discounted cash flow (DCF) analysis prepared by a petroleum engineer or certified mineral appraiser. This is the standard method recognized by industry professional organizations like the Society of Petroleum Evaluation Engineers (SPEE) and accepted by the IRS for estate valuations. The appraiser examines current and projected production, commodity prices, decline curves, operating costs, and remaining reserves, then discounts the projected cash flows to a present value as of the date of death.

The key inputs include:

  • Current production volumes (barrels of oil, MCF of gas) from each well producing on the interest
  • Commodity prices on or near the date of death (WTI for oil, Henry Hub or regional hub for gas)
  • Decline curves that estimate how quickly each well’s production will drop over time
  • Lease terms, including the royalty rate and any post-production deductions
  • Remaining reserves based on engineering estimates
  • A discount rate reflecting the risk and time value of money

For non-producing mineral interests (unleased acreage or acreage with no active wells), a DCF analysis does not apply because there is no production to project. Appraisers typically rely on comparable sales, looking at recent arm’s-length transactions for similar mineral acreage in the same basin or play. This is harder to do well because mineral sales data is less transparent than surface real estate, but platforms like EnergyNet and county deed records provide reference points.

Our article on How Much Are My Mineral Rights Worth covers the income approach in more detail.

Example

Suppose a parent purchased 20 net mineral acres in a West Texas county in 1995 for $10,000. By the time of death in 2025, those acres sit under multiple producing horizontal wells. A petroleum engineer’s appraisal, using a discounted cash flow of remaining reserves, determines the fair market value on the date of death is $250,000. The heir’s stepped-up basis is $250,000, not $10,000. If the heir later sells for $280,000, the taxable capital gain is $30,000 (not $270,000). And while holding, the heir can recover up to $250,000 in cost depletion against future royalty income.

Does the Appraisal Have to Be Done Right Away?

No. The IRS does not require the appraisal to be prepared on or near the date of death. What matters is that the appraisal establishes fair market value as of the date of death, using production data, commodity prices, and reserve estimates that existed at that time. A petroleum engineer can prepare a retroactive appraisal months or even years later. Tax courts have consistently evaluated mineral valuations on the soundness of their methodology and inputs, not on when the report was drafted (see Treasury Regulation section 20.2031-1(b), which defines fair market value without imposing a preparation deadline).

That said, waiting has real costs. The longer the delay, the harder it is to reconstruct the data. Operator records may be purged, wells may change hands, and an engineer reconstructing reserves as of a past date must be careful not to use subsequent production data (which introduces hindsight bias the IRS can challenge). A retroactive appraisal prepared only after a sale, supporting a conveniently high basis, invites scrutiny. A contemporaneous appraisal is simply stronger evidence. The cost of a professional mineral appraisal (typically a few hundred to a few thousand dollars depending on the complexity of the interests) is modest compared to the tax exposure of defending an undocumented claim years later.

Save Buyer Offers as Supporting Evidence

If the decedent received purchase offers from mineral buyers around the time of death, keep them. Under Treasury Regulation section 20.2031-1(b), fair market value is defined as “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” A bona fide, arm’s-length offer from a knowledgeable mineral buyer near the date of death is relevant evidence of what the market was willing to pay. These offers are not conclusive on their own, but they corroborate an engineering-based valuation and can be useful if the IRS later questions the appraised figure.

Even for estates well below the federal estate tax filing threshold, getting a supportable valuation at the time of death is usually worth the cost.

Ongoing Taxes and Royalty Income

Texas has no state income tax, but mineral ownership still comes with tax obligations.

  • Federal income tax on royalties. Royalty payments show up on a Form 1099-MISC in Box 2 and get reported on Schedule E. Qualifying small producers can generally take up to a 15 percent statutory depletion deduction under Internal Revenue Code section 613A, subject to statutory caps.
  • Ad valorem property tax on producing minerals. Texas counties tax producing mineral interests annually, based on the appraised value of remaining reserves. The methodology is set out in Texas Tax Code section 23.175 and administered by each county’s appraisal district. Once title has transferred, the heir becomes the responsible taxpayer. It is worth calling the county appraisal district directly to make sure ownership records are updated; recording the probate document helps but does not always trigger a change at the CAD.
  • Capital gains if the minerals are later sold. The tax treatment of a sale differs from ongoing royalty income. The step-up in basis is what makes a future sale more favorable than it otherwise would be.

Common Complications

Multiple heirs. When several siblings or cousins inherit undivided fractional interests in the same mineral property, each becomes a cotenant. Under Texas law, any cotenant can generally lease their own share independently, which creates coordination problems for operators and sometimes for the family. This topic deserves its own article and will get one.

The existing lease continues. An oil and gas lease in Texas is a conveyance of a real property interest, not a personal contract. Death of the lessor does not terminate it. The heir steps into the lessor’s position, bound by all existing lease terms, including royalty rate, pooling, and depth limitations. Get a copy of any lease in place and read it carefully. Our article on mineral leases explains how they work.

Missing chain of title. It is common in Texas for wills two or three generations back to have never been probated. This leaves gaps in the deed records that a title examiner will flag. Closing those gaps may require determination-of-heirship proceedings for long-dead ancestors, or recorded affidavits of heirship that eventually season under the five-year rule. A title attorney who handles oil and gas matters is the right person for this work.

Where to Find Help

Free and low-cost resources include:

Paid professionals who commonly come up in mineral inheritance:

  • An oil and gas title attorney licensed in Texas (not just a general probate attorney) for anything beyond a clean single-asset estate.
  • A petroleum engineer or certified mineral appraiser for the date-of-death valuation.
  • A CPA familiar with oil and gas taxation for ongoing royalty income, depletion, and any future sale.

The Bottom Line

Inheriting mineral rights in Texas is manageable, but it is not automatic. Title has to be cleared through one of Texas’s probate or heirship paths, the operative document has to be recorded in the county where the minerals are located, and the operator has to be notified before royalty payments will resume in the heir’s name. A contemporaneous date-of-death valuation protects against future tax surprises, and ongoing federal income tax and Texas ad valorem property tax come with the territory.

There is no universal timeline. Straightforward cases with a valid recent will and no debts can be cleared through muniment of title in a few months. Intestate estates spanning multiple generations can take years. The right first move for most heirs is a conversation with a Texas attorney who handles oil and gas estates, armed with any will, deeds, leases, lease bonus receipts, royalty statements, tax records, or old check stubs that can be found.

Caddo Minerals has been working with mineral owners since 2009. If you have questions about your mineral rights, reach out. We are happy to help.

This article is provided for informational purposes only and should not be construed as legal or tax advice. Always consult a qualified Texas attorney and a CPA for your specific situation.