Fixing Property Left Out of a Trust
Living trusts are flexible estate planning tools that enable individuals to transfer their estate to designated heirs without the expense of probate. But probate will not be avoided unless the trust is funded. Funding a trust often requires recording a deed granting title to real property to the trustee or completing forms with banks or financial institutions to transfer title to accounts. When title is not updated before the transferor's death, the successor trustee may be unable to gain full legal ownership of the property left out of the trust.
However, property left out of a trust can be reinstated into the trust by a Heggstad petition. In California, a Heggstad petition allows a court to issue an order confirming that an asset is part of a trust estate.
To confirm an asset as part of a trust estate, a petitioner must demonstrate by clear and convincing evidence that the creator of the trust made a declaration that the property was part of the trust estate. Most commonly, the declaration will be made in the form of an explicit written declaration, as part of the trust document itself, stating that the asset is intended to be part of the trust estate. For example, an "exhibit" or "schedule" at the end of the trust might list the asset, along with an explicit declaration that such listed property is part of the trust estate. However, a declaration may be proven by other methods that demonstrate the trust creator's intention to hold the asset as a trust asset. For example, oral statements can demonstrate that a financial account was meant to be an asset of a trust. Also, use of trust funds to purchase an assets may go to show that the asset was meant to be part of the trust.
A Heggstad petition must be filed in the proper county. But this determination can be tricky. The proper county is not necessarily the county where the asset is located or where the trust creator died. Instead, proper venue is generally in the county where one or all of the trustees lives or does business. But if the trustees live out of state, then the default rules pursuant to the civil code generally apply. In that case, venue will normally be in the county where some or all of the assets are located. This determination is simple if the property is real property. The analysis can be more complicated if the asset is an account. In that case, venue may be in the county where the trust creator was living as at the time of their death. But a petition should seek legal counsel before making a final determination regarding venue.
A Heggstad petition must include proper notice. Notice should be given by mail to any beneficiaries of the trust. Notice must be given by personal service to any trustee (other than the petitioner), anyone who would be disinherited by the trust, and anyone holding any interest in the asset, including any tenants, banks, or lenders.
Many different kinds of assets left out of a trust can be confirmed as trust assets by a Heggstad petition. Houses and bank accounts are the most common assets, but Heggstads can also apply to any kind of real property, personal property, stock certificates, interests in businesses, proceeds from inheritance or life insurance, and many other assets. Special care should be taken when seeking Heggstads for any property subject to federal regulation, like tax-deferred assets such as 401ks or IRAs, interests in assets governed by ERISA, and federal bonds.
The process to confirm an asset left out of a trust by a Heggstad petition can take 2-6 months, depending on the county of filing. Expedited relief can be granted when time critical circumstances require an immediate decision, such as when there is a pending foreclosure, or where beneficiaries need access to proceeds for their immediate health care needs. Such "ex parte" relief may require additional filings or permission.
Book a free consultation to find out if a Heggstad petition can help you avoid probate.
