THEATJTORNEY GENERAL 

WILL WILSON 

AlTORNEY GENERAL 

OF %-EWAS 

Ausnnr ~%‘J?ExAs 

May 16, 1961 

Honorable Robert S. Calvert Opinion No. wwe joo 

Comptroller of Public Accounts 

Capitol Station Re: Proper method of computing 

Austin, Texas inheritance taxes on royalty 

interest of life tenant 

Dear Mr. Calvert: under submitted facts. 

We quote the following excerpt from your letter requesting 

the opinion of this office on the above captioned matter: 

"Winnie Craft Minchen Crlffls died 

testate on August 15, 1958, a resident of 

Harris County, Texas, seized and possessed 

of an estate valued at $723,525.32 gross. 

The bulk of the estate of the deceased 

consists of a royalty interest in the Old 

Ocean Field in Brazoria County, Texas. 

The average monthly income from this 

royalty interest Is $6,300.OO~whlch was 

valued on a 100 month 

100 X 6,300.oo equals % 

ay-out basis. 

630,000.00, the 

value of the mineral Interest of the 

deceased." 

The pertinent provisions of the decedent's will, which you 

have submitted to us, are the following: 

"Item 4. 

"I hereby appoint the National Bank of 

Commerce of Houston, Texas, a national 

banking association, executor under this 

will and of my Estate and direct that no 

bond shall be required of it. 

"With the exception of the hereinafter 

mentioned property, my Executor shall have 

full power and authority to sell or mortgage 

any part or parts, real or personal, of my 

estate on such terms and for such conslderatlon or considerations as it may deem advisable. 

"My said Executor shall have no authority 

from me to sell or mortgage my interest In 
Honorable Robert S. Calvert, Page 2 Opinion NO. 7~1058 

what is known as the - Old Ccesn Oil Field In 

Brazoria County, Texas, except that, as 

a last resort, it may mortgage the royalty 

and/or rental income from my Interests in 

said oil field for the purpose of paying 

the State Inheritance Taxes and the Federal 

Estate Taxes on my Estate. 

"Item 5. 

"I give and bequeath all of my personal 

property to my legally adopted son, William 

France Minchen, to be held by him as his 

separate property. 

"Item 6. 

"I give and devise all of my real property 

to my legally adopted son, William France 

Minchen, for and during his natural life to 

have the use and benefit of same as his 

separate property and, upon his death, said 

real property shall pass to and vest in such 

of his issue as he may by his will appoint 

which power Is and shall be exercisable by 

him alone and in any event," 

Other provisions of the will relate to the disposition of 

the properties covered by the last foregoing paragraph in the 

event of nor?-exercise of the newer of aopoi.ntment and provide, 

generally, that such properties shall become the property of the 

son's children or their descendants. 

We quote further from your letter in connection with this 

request: 

"We construe the provisions of the above 

paragraph as passing the full monthly 

royalty payments to the son of the deceased, 

and since the son has a life expectancy of 

36.7 years, he will consume the entire 

royalty value in 100 months. This construction does not conflict with the terms 

of the will nor the provisions of Article 

14.08,... .'I 

"Please advise whether or not our construction is correct." 
. . .- 

Honorable Robert S. Calvert, Page 3 Opinion NO. ~~-1058 

Article 14.08, Ch. 14, Title 122-A, Tax.-Gen., Vernon's 

Civil Statutes, reads as follows: 

"If the property passing as aforesaid 

shall be divided into two or more estates, 

as an estate for years or for life and 

a remainder, the tax shall be levied on 

each estate or Interest separately, according to the value of the same at the death 

of the decedent. The value of estates for 

years, estates for life, remainders and 

annuities, shall be determined by the 

'Actuaries Combined Experience Tables,' 

at four per cent compound interest." 

The taxpayer takes the position that this Article is controlling as to the determination of the tax. If this be correct, 

the value of the life estate would be computed by '. multiplying the value of the beneficial interest by 4s and this'product 

by the factor (present value of $1.00) for the given age of the 

life tenant; the result is the value of the life estate. Subtract 

the value of the life estate (as ascertained above) from the 

beneficial interest, and the amount left will be the value of 

the remainder estate."1 

The general rule is that the life tenant is entitled q 

to all the profits or income accruing during his life tenancy. 

It is evident that the statutory method of computing the 

value of a life estate is predicated on the theory that the value 

of the property subject to the life estate will remain constant 

during the life of the life tenant. It is a workable method of 

valuing a life estate only if it may be assumsdthat the value of 

the estate so devised, In this case the royalty interest, will 

remain the same. In other words, under Article 14.08 the valuation 

of a life interest serves two purposes. It serves as a measure of 

the tax on the life interest and az8tk rnnr~s of determining the 

value of the remainder interest. . Inheritance, Estate 

and Gift Taxes, 277, 278, Sec. 368, and auth&ities cited therein. 

It is settled in this State that the 011 and gas beneath 

the soil are considered a,part of the realty. 31-A Tex.Jur. 27, 

Oil and Gas, Sec. 6. It is also settled that a life estate in 

lands extends to the unsevered 011 and gas beneath the surface. 

31-A Tex.Jur. 38, Oil and Gas, Sec. 13. If, under the will 

foregoing directions are contained in the Actuaries' 

Experience Tables. 

g Tzpl$ v. Medlin, 203 S.W.2d 635 (Civ.App., error ref., 1947); 

* J 6 59 . 3 , Life Estates, Sec. 7. 
Honorable Robert S. Calvert, Page 4 Opinion NO. w-1058 

under consideration, the adopted son received only the r,ights 

of an ordinary life tenant in the royalty interest, the value 

of that which he received would be properly computed under the 

provisions of Article 14.08, i.e., as therein directed upon 

the ascertained value, rather than upon the full monthly royalty 

payments. 

We think that the will, as a whole, evidences an intent on 

the part of the testatrix that the beneficiary is to receive the 

royalty payments in their entirety (not just the income therefrom) 

for the duration of his natural life. The executor has no 

authority to sell or mortgage the royalty and/or rental income 

involved except as a last resort for the payment of death taxes. 

The royalty interest is covered by the provisions of Item 6, 

which devises all of the decedent's real property to her adopted 

son "for and during his natural life to have the use and benefit 

of ssme as his separate property... 11 (Emphasis added.) The 

royalty interest involved was a prod&ing royalty interest at 

the date of the decedent's death, and we think that the testatrix 

clearly intended her adopted son to have the entire benefit thereof 

rather than only the income therefrom. The provision with regard 

to the exercise of the power of appointment to his issue merely 

evidences an intention to endow him with the right to will any 

unpaid royalties to such of his issue as he might choose. The 

provisions pertaining to the non-exercise of the power of appointment are likewise drawn for the purpose of insuring that the 

son's issue receive any of the royalty interest that might remain 

at his death should he fall to exercise the power of appointment. 

Our interpretation of the testatrix's intention is consistent 

with the common law rule and with the results reached by the 

Texas Courts that a life tenant may continue to work or have 

operated oil wells that were open when his life interest commenced 

or to recover the royalties of such operations. 31-A Tex.Jur. 

39, Oil and Gas, Sec. 13. At page 39 of the foregoing text, the 

following statement appears: 

"The theory of the rules stated in 

the text is that where the oil producing 

operations are commenced before the life 

tenancy is created, they are a mere mode 

of use and enjoyment and to extract oil 

and gas is but to take the accruing benefits 

of the land. Higgins 011 and Fuel Co. v. 

Snow, (1902) 51 C.C.A. 267, 113 F. 433." 

Although the life tenant, as a general rule, may not open 

new wells or extract oil or gas from the land for his own benefit 

since such act would be an appropriation of a part of the corpus 

of the estate, there are exceptions to this general rule which 
Honorable Robert S. Calvert, Page 5 Opinion No. ~~-1058 

give the life tenant a continuing right to benefit in wells drilled 

after the creation of the life tenancy. These exceptions arise by 

reason of some act by the original owner and may be conferred b 

the instrument conveying to him such estate. 31-A Tex.Jur. 39- i: 0, 

Oil and Gas, Sec. 13. We have previously construed the will 

under consideration as evidencing such sn intention on the part 

of the original owner. 

Since we have concluded that the beneficiary life tenant in 

this case is entitled to the entire royalty interest during his 

lifetime -- not just the income therefrom, and since his life 

expectancy far exceeds the estimated pay-out period, inheritance 

taxes should be computed on the entire value of the royalty 

interest, rather than under the provisions of Article 14.08. You 

are accordingly so advised. 

SUMMARY 

Under submitted facts, inheritance 

taxes should be computed on the entire 

value of a life tenant's royalty interest 

rather than on the basis of a life estate 

in such royalty interest. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 

By: 

Marietta MC 

MMP:cm Assistant 

APPROVED: 

OPINION COMMITTEE: 

W. V. Geppert, Chairman 

Edward A. Cazares 

C. Dean Davis 

Harris Toler 

REVIEWED FOR THE ATTORNEY GENERAL 

By: Morgan Nesbitt