Heggstad for non-California assets part deux

In homage to the great American movie starring Charlie Sheen and Lloyd Bridges among others, Hot Shots Part Deux, I bring you part deux on Heggstad petitions for non-California assets. This is a question I get asked about it a lot.  Since it was almost 6 years ago that I put up a post on this topic I thought I should update.

I consulted with Joseph J. Powell, the Nevada attorney who I originally worked with on this matter, to confirm some details. Here are his words on the matter:

What the situation was was that the trustee for the Trust, a CA trust, had gotten a Heggstad order issued by the CA court in regard to NV property, located in Las Vegas.  The trustee then acted on that order and had the title changed in NV, through the Clark County recorder’s office, to the Trust, again a CA trust.  I represented a creditor of the estate and moved to have the transfer undone and was successful . . . . . initially.  My end goal was to have the NV property subject to an NV estate matter so that it would be easier access by my creditor client by requiring it to go through the NV estate administration.  Ultimately, I was not successful as the NV probate court did, eventually, allow it to get into the trust and bypass probate.   I will explain what occurred.

Based on my objection, our probate court undid the transfer to the Trust based on the CA Heggstad order, thus putting it back into the Decedent’s name as it was held prior to the Decedent’s death.  The ruling was based on the fact that CA had no jurisdiction over NV property to render the order in the first place.  However, negating that transfer to the Trust just lasted a short time.  The trustee then brought the equivalent of his Heggstad petition here in Nevada, under the NRS (Nevada Revised Statutes) statute which is the functional equivalent, and contains nearly verbatim language of that found in CA Probate Code 850.  Over my objection, the NV petition was granted.  The basis for my argument was the existence of the creditor’s claim having already been filed.  My argument, in its most boiled down form, was that the transfer to the Trust, skipping probate, would be fine when there is not a creditor’s claim pending, but shouldn’t be allowed when there is an existing claim filed against the Estate.  In other words, a Heggstad petition should only be granted in NV when there is not a creditor issue which would then not allow the creditor to make a claim to the property through the Estate proceeding.  The argument was that a creditor should not have to try to collect against a trust asset, which was technically not a trust asset at death.  In other words, a probate avoidance should not be allowed in the case of a pending claim against the person’ estate, as obviously a creditor cannot bring a claim against the Decedent’s Trust, straight out of the box, unless there was some contractual right to do so.  In NV, a trust asset can only be touched, absent a contractual claim, if the Estate is otherwise insolvent, and there are some other hoops to jump through as well.  In any event, my argument lost and the equivalent of the Heggstad petition was granted by our court and thus allowed the NV house to get into the trust, thus skipping probate.   We could have appealed, but the client determined that it was not worth the hassle as there were, at the time, other avenues to seek collection.

The Los Angeles county case was In the Matter of the HARRY ROSS AND ANNA ROSS REVOCABLE TRUST DATED JULY 9, 1987, AS RESTATED ON MAY 10, 1993 AND AMENDED AS TO THE SURVIVOR’S TRUST ONLY ON AUGUST 31, 2000, with the case number being P-12-074607-T. The Clark County, Nevada, case number was GP016315.  It should be pointed out that the attorney in the LA County matter referred to 17200(b) which, as many know, has similarities to California PC 850. That will be a blog post for another day!

I think the most important take-away from this is that Nevada has a law similar to Heggstad so if you have a Nevada asset outside of a trust just file in Nevada. Contact Mr. Powell (702-255-4552), or other experienced Nevada counsel, to work with them on your Nevada/California cross-over cases. I should add that Mr. Powell is licensed in both California and Nevada.

Until next time….

-John

New California Probate Code Section 851

Attention probate attorneys and do-it-yourselfers:
If you are utilizing California probate code 850 to do a Heggstad petition or other utilization of this broad code section be careful on your notice of hearing! As of January 1, 2018 there is a new California probate code section 851. I will paste it below.

I have highlighted in red the key changes. This is important because failure to follow this will most certainly give you a delay of a month, or more, in your hearing!

If you have any specific 850 or 851 questions it’s possible I can help. Let me know.

-John

 

Probate Code
Prob C § 851. (a) At least 30 days prior to the day of the hearing, the petitioner shall cause notice of the hearing and a copy of the petition to be served in the manner provided in Chapter 4 (commencing with Section 413.10) of Title 5 of Part 2 of the Code of Civil Procedure on all of the following persons where applicable:

(1) The personal representative, conservator, guardian, or trustee as appropriate.

(2) Each person claiming an interest in, or having title to or possession of, the property.

(b) Except for those persons given notice pursuant to

subdivision (a), notice of the hearing, together with a copy of the petition, shall be given as provided in Section 1220 if the matter concerns a decedent estate, as provided in Section 1460 if the matter concerns a conservatorship or guardianship, or as provided in Section 17203 if the matter concerns a trust to all of the following persons:

(1) Each person listed in Section 1220 along with any heir or devisee whose interest in the property may be affected by the petition if the matter concerns a decedent estate.

(2) Each person listed in Section 1460 if the matter concerns a conservatorship or guardianship.

(3) Each person listed in Section 17203 if the matter concerns a trust.

(c) A notice of hearing shall contain all of the following:

(1) A description of the subject property sufficient to provide adequate notice to any party who may have an interest in the property. For real property, the notice shall state the street address or, if none, a description of the property’s location and assessor’s parcel number.

(2) If the petition seeks relief pursuant to Section 859, a description of the relief sought sufficient to provide adequate notice to the party against whom that relief is requested.

(3) A statement advising any person interested in the property that he or she may file a response to the petition.

(d) The court may not

shorten the time for giving the notice of hearing under this section. [Amended by Stats. 2017, Ch. 32, Sec. 1. (AB 308) Effective January 1, 2018]

Carne v. Worthington (2016) 246 Cal.App.4th 548 – Heggstad petitions with trusts

You likely know that CaliforniaProbate.info tries to stay up on all “Heggstad” related news. As the owner of www.heggstadpetition.com it is imperative that I keep up-to-date on these cases. We advise clients, and potential clients, almost daily about the nuances of a Heggstad petition.

As you likely know a “Heggstad” petition is a probate court petition brought pursuant to California Probate Code 850. The primary goal of a Heggstad petition is to get an asset into a trust that was not properly titled as such. The common scenarios we see are:

1) the person set up the trust themselves, without the aid of an attorney, and failed to properly “fund” the trust;

2) the person set up the trust with an inexperienced or sloppy attorney who did not help the client properly fund the trust;

3) the asset was acquired after the trust establishment and the trust was not properly funded;

4) the person did a re-finance on their house, the title company moved the property out of the trust, and failed to put the property back into the trust.

The seminal case was the Estate of Heggstad in 1993. That case looked about like this:

Estate of HALVARD L. HEGGSTAD, Deceased.

GLEN P. HEGGSTAD, as Trustee, etc., Petitioner and Respondent, v. NANCY RHODES HEGGSTAD, Objector and Appellant.

This case was groundbreaking and has been used countless times to successfully fund trusts after death. Estate of Heggstad, (1993) 16 Cal.App.4th 943).

In 2015, as you have read on my blog before, the courts went further than Heggstad with the case: Ukkestad v. RBS Asset Finance, Inc. (2015) 235 Cal.App.4th 156. This case was essentially Heggstad on steroids and made it even easier to get assets into a trust after death.

Now it’s time to go further! The latest case in the Heggstad family is Carne v. Worthington (2016) 246 Cal.App.4th 548. Mentioning Heggstad, by name, over 20 times the court took Heggstad further.

As you know intent is still the key with “Heggstad” petitions. The required showing of intent is just less than it used to be. In most California courts this has been a problem for real estate. That is, most courts have been comfortable getting personal property (such as bank accounts) into a trust without much specific showing of intent. Something along the lines of “I intend for all my assets to be in this trust” has been enough in many cases. However, getting real estate transferred after death took more than that.

With Ukkestad and now Carne I believe with either personal property or real estate you should have a very good chance of getting assets put into a trust. Intent is still needed but that showing of intent probably does not have to be as specific as it used to.

Of course I am just providing GENERAL information here. Each case is unique and you should review your facts with an experienced Heggstad lawyer. As an attorney that has successfully performed dozens and dozens, if not over 100, Heggstad petitions I can very quickly give you my professional opinion. That is not an opinion based on reading law books and theory but actually DOING these cases. I believe I have an extremely good sense of what will work in most courts.

Also, it’s important to keep in mind that sometimes a Heggstad is not the right approach. For example, if the asset in question is worth less than $150,000 there is likely a better way to get the asset into the trust; a more sure way that does not cost more. So, again, evaluate your options with an experienced estate attorney.

The attorney you talk to should know about Heggstad, Ukkestad, and Carne!

Best of luck to you. -John

Heggstad petition v. full probate after death of first spouse

I spoke to a potential new client recently who has a very common scenario. For this blog we will call them Mr. and Mrs. Smith.  He and his wife have a trust from the early 1980’s.  It appears to be a fairly standard trust. Along with it they also have “pour over” wills as most people have.  Mrs. Smith died recently with an asset out of their trust.

In about the year 2000 they bought a home together in the Sacramento area.  They bought the home “as community property.” That is the deed says “John Smith and Jane Smith, husband and wife as community property.”  Unfortunately the CP with right of survivorship law had not come into effect in that year. Thus California did not yet have an automatic community property ownership option yet.

As a probate attorney when I see husband and wife as community property, but without the words “with right of survivorship” I immediately think of doing a spousal property petition. That is an abbreviated petition in the probate court to transfer the property from one spouse to another.  It is a pretty quick petition and fairly routine when the property is titled in community property. However, a spousal property petition does not work when there is a pour over will. In this case Mr. and Mrs. Smith have the standard pour over will to their trust. Spousal property petitions only work between a husband and a wife; not a trust. So the SPP will not work. What other options does Mr. Smith have?

I believe his only two options are:

  1. A Heggstad petition pursuant to California probate code 850; or
  2. A full probate.

I have blogged other times about the Heggstad petition so I’ll keep it brief here. A Heggstad petition is a way of transferring property to a trust by showing that the decedent intended for the property to be in a trust. With real estate the intent should be shown by a specific writing. The most common writings are: 1) a specific listing of real estate on a schedule of assets, 2) a specific mention of the property in the trust document (i.e. “I give the property located at 1234 Main Street to my son Bob….”), 3) a signed but unrecorded deed, or 4) other written statements such as a letter to an attorney asking for a deed to be prepared. If successful a Heggstad petition should be done in about 8 weeks. The result will be a court order that is recorded in the county recorder’s office.

In this case there is none of the above written intent. I thus think the odds of a Heggstad petition working are probably 50%, at best. In fact, 50% is really the most generous I can be and that’s hoping the Judge is feeling generous. To increase our chances of success I would have Mr. and Mrs. Smith’s children sign consents to the petition and file those with the court.

The other option is a full probate. While the above only supplies about a 50% chance of success a full probate is a 100% chance of success. Unfortunately it costs more money and takes longer. In this case it would probably cost Mr. Smith about double the money that a Heggstad petition would.  Also a full probate is 7 months MINIMUM in time. However, the property can be sold during probate so upon the appointment of Mr. Smith as Executor, in about 6-8 weeks, he can close escrow. That is, 1/2 of the house would be owned by the estate and 1/2 would be owned by him as an individual.

Other options for Mr. Smith to consider?  One option I offered was to file the Heggstad petition and a full probate simultaneously. The advantage is that if the Heggstad petition is not successful the probate is already filed and ready to be approved. The added cost is probably $1,000, or so, for the initial probate costs (filing fee with the court and publication in the newspaper). If the heggstad petition is successful then the full probate would be dropped. On the other hand if the Heggstad is not successful then we move forward with the full probate.

It is unfortunate that Mr. and Mrs. Smith did not deed the property into their trust while Mrs. Smith was still alive.  However, they didn’t so, at this point, it is what it is. We need to clean it up so that Mr. Smith can get the house sold.

If you have a situation, like Mr. Smith, contact us to discuss YOUR best option!   -John

NEW Heggstad Petition Case

I got notice a couple weeks ago of a new case to help get Heggstad petitions approved. That is, petitions brought under California probate code section 850.

The case is:

Ukkestad v. RBS Asset Finance Filed  March 16, 2015, Fourth District, Div. One Cite as C065630

Here is the summary I received:

Settlor established a Trust which recited that all of his “right, title and interest” to “all of his real … property” is included in the Trust’s assets.  After the Settlor’s death, the Co-Trustee brought a petition under Prob. C. § 850 for an order that two parcels held in the name of the Settlor were part of the Trust.  In reversing the trial court’s denial of the petition, the appellate court noted that a Heggstad petition will lie if the owner of the real property is the settlor creating the trust with him or her as trustee and if the transfer of the real property complies with the statute of frauds. Held, the recital in the Trust satisfied the statute of frauds because it could be established by extrinsic evidence that the Settlor held title to the parcels.

More information can be found on the Court’s website.

It is my experience, after successfully filing dozens and dozens Heggstad petitions that each new case, like this one above, help us. Each new case supports us in our quest to help our clients avoid full probates!

You can always turn to our website at www.heggstadpetition.com for the latest on California probate code 850 Heggstad petitions.

-John

 

California Heggstad Petitions and Kucker v. Kucker

I recently had the following calendar note in a probate case in Alameda County. We had filed a Heggstad petition, pursuant to California probate code 850, to get two properties into a trust after death. I should clarify our firm had NOTHING to do with the case before death. We pride ourselves on helping our clients properly fund their trusts. However, this woman died without these two properties in the trust. The calendar note from the Alameda county probate court provided:

*For Judicial review: Note that the trust does not specifically identify the real property located in Redwood City . In Kucker v Kucker, it was confirmed that the statute of frauds applied to a trust in real property. As in Kucker, the trust has not specifically identified the property in question. PC 15206 provides that a trust in real property is not valid unless it identifies the real property with some specificity.

I had, of course, heard of Kucker but had not seen a court mention it. I thus looked it up. The entire case is below and is great reading… if you do a lot of Heggstad petitions. It goes through the laws at a much deeper level than most blog posts do. Check it out below. If you want to talk about your Heggstad case contact us. You can always reach us at www.heggstadpetition.com. Or if you are an attorney and want to associate us in to help you with your client’s case we can do that too in some situations. Again, contact us and let’s talk! -John
192 Cal.App.4th 90 (2011)

MEGAN KUCKER et al., as Trustees, etc., Plaintiffs and Appellants,
v.
MEGAN KUCKER, Respondent.

No. B225165.

Court of Appeals of California, Second District, Division Six.

January 26, 2011.

91*91 Ferguson Case Orr Paterson, Robert B. England, Sandra M. Robertson and David Shea for Plaintiffs and Appellants.
92*92 OPINION
YEGAN, J.—

Megan Kucker and Bonnie Alexander are successor trustees of the Mona S. Berkowitz Trust (the Trust). They filed a petition to confirm that shares of stock were an asset of the Trust. (Prob. Code, § 850, subd. (a)(3)(B); see also Estate of Heggstad (1993) 16 Cal.App.4th 943 [20 Cal.Rptr.2d 433].)[1] The shares had been owned by the deceased trustor, Mona S. Berkowitz (Trustor). Appellants appeal from the probate court’s order denying their petition. The probate court erroneously concluded that the Trustor’s general assignment to the Trust of her personal property was ineffective to transfer the shares of stock to the Trust. We reverse.
Background
On June 29, 2009, at the age of 84 years, Trustor signed a declaration creating a revocable inter vivos trust. On the same date, Trustor signed a general property assignment (the General Assignment) stating, “I … hereby assign, transfer and convey to Mona S. Berkowitz, Trustee of the [the Trust], all of my right, title and interest in all property owned by me, both real and personal and wherever located.” Trustor also signed a pour-over will leaving her entire probate estate to the Trust.

On October 29, 2009, Trustor signed an amendment and restatement of the Trust. On the same date, Trustor signed an assignment transferring to the Trust all of her shares of stock in 11 specified corporations and funds. The amendment and restatement designates appellants, Trustor’s daughter and niece, as successor trustees upon the death of Trustor.

Trustor died in November of 2009. In February 2010, appellants filed a petition to confirm that 3,017 shares of stock in Medco Health Solutions, Inc. (Medco), were an asset of the Trust. Medco was not mentioned in the assignment of stock signed by the Trustor on October 29, 2009. Appellants declared that the Medco shares “were not held in the Trust’s brokerage account at the time of the Trustor’s death.” Appellants further declared that the stock certificate for the Medco shares had been lost and that the shares had a market value in excess of $100,000. Appellants contended that, based on the General Assignment, “it was the intent of the Trustor that all stock owned by the Trustor, including the Lost Certificate Shares, be part of the Trust Estate of the Trust.” The record on appeal does not include any opposition to appellants’ petition, and we assume that none was filed.

The probate court conducted a hearing on the petition. The record does not include a reporter’s transcript of the hearing. In its written ruling, the probate 93*93 court stated: “During oral argument …, counsel suggested that Probate Code section 15200 et seq. and 15207 [oral trust in personal property], in particular, provided a basis for granting the petition for order confirming assets in the trust estate. The Court has reviewed these code sections. The Court agrees that an oral trust can be created for personal property. If clear and convincing evidence is presented, the Court may conclude that an oral trust has been created. [¶] However, the Court believes that Probate Code section 15207 must be read in conjunction with Civil Code section 1624(a)(7). In those instances where the settler intends to transfer assets in excess of $100,000, a writing specifically describing the property is required. Accordingly, the petition confirming assets in the trust is denied.”
Standard of Review
“The [probate] court’s construction of the Probate Code is subject to our de novo review. [Citation.]” (Araiza v. Younkin (2010) 188 Cal.App.4th 1120, 1124 [116 Cal.Rptr.3d 315].) Because there is no conflicting extrinsic evidence as to the Trustor’s intent, we independently review the written instruments at issue. (Ike v. Doolittle (1998) 61 Cal.App.4th 51, 73 [70 Cal.Rptr.2d 887].) Since appellants have not provided a reporter’s transcript of the hearing on the petition, “we must treat this as an appeal `on the judgment roll.’ [Citations.] Therefore, … [o]ur review is limited to determining whether any error `appears on the face of the record.’ [Citations.]” (Nielsen v. Gibson(2009) 178 Cal.App.4th 318, 324-325 [100 Cal.Rptr.3d 335].)[2]
Discussion
The probate court’s reliance upon Civil Code section 1624, subdivision (a)(7), is misplaced. This section provides: “(a) The following contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent: [¶] … [¶] (7) A contract, promise, undertaking, or commitment to loan money or to grant or extend credit, in an amount greater than one hundred thousand dollars ($100,000), not primarily for personal, family, or household purposes, made by a person engaged in the business of lending or arranging for the lending of money or extending credit. For purposes of this section, a contract, promise, undertaking or commitment to loan money secured solely by residential property consisting of one to four dwelling units shall be deemed to be for personal, family, or household purposes.” The probate court’s 94*94 construction of this section is an error that “`appears on the face of the record.’” (Nielson v. Gibson, supra, 178 Cal.App.4th at pp. 324-325.)

(1) “`When construing a statute, we must “ascertain the intent of the Legislature so as to effectuate the purpose of the law.”‘ [Citation.] `In determining such intent, a court must look first to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose.’ [Citation.]” (State Farm Mutual Automobile Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029, 1043 [12 Cal.Rptr.3d 343, 88 P.3d 71].)

(2) Civil Code section 1624, subdivision (a)(7), cannot be construed as applying to the transfer of shares of stock to a Trust. The plain meaning of the words of the statute manifests a legislative intent to limit the statute’s application to agreements to loan money or extend credit made by persons in the business of loaning money or extending credit.

The probate court’s error in construing Civil Code section 1624, subdivision (a)(7), does not mean that appellants’ requested relief on appeal must be granted. Appellants request that “the determination of the [probate] court … be reversed, and a determination made that the Medco Stock was effectively transferred by the General Assignment to the Trust prior to the death of the Trustor.” The probate court impliedly concluded that, irrespective of Civil Code section 1624, subdivision (a)(7), the General Assignment was ineffective to transfer the Medco stock to the Trust. Otherwise, in its ruling the court would not have made the following reference to an oral trust: “The Court agrees that an oral trust can be created for personal property. If clear and convincing evidence is presented, the Court may conclude that an oral trust has been created.”[3]

(3) The probate court erred by not ruling that the General Assignment was effective to transfer the Medco shares to the Trust. In construing the General Assignment, we must implement the Trustor’s intent. (Ike v. Doolittle, supra, 61 Cal.App.4th at p. 73.) The General Assignment and pour-over will show that the Trustor intended to transfer all of her personal property to the Trust. The Trustor’s omission of the Medco shares in the subsequent assignment of October 29, 2009, was an oversight caused by the misplaced stock 95*95 certificate. Appellants declared that the subsequent assignment provided “for the transfer of shares of stock for which certificates had been located.”

The General Assignment was ineffective to transfer the Trustor’s real property to the Trust. To satisfy the statute of frauds, the General Assignment was required to describe the real property so that it could be identified. (Sterling v. Taylor (2007) 40 Cal.4th 757, 772 [55 Cal.Rptr.3d 116, 152 P.3d 420]; King v. Stanley (1948) 32 Cal.2d 584, 589 [197 P.2d 321], disapproved on other grounds in Patel v. Liebermensch(2008) 45 Cal.4th 344, 351, fn. 4 [86 Cal.Rptr.3d 366, 197 P.3d 177]; Osswald v. Anderson (1996) 49 Cal.App.4th 812, 818 [57 Cal.Rptr.2d 23].) But the issue here concerns the Trustor’s transfer of shares of stock, not real property. The statute of frauds does not apply to such a transfer. (Civ. Code, § 1624.) There is no California authority invalidating a transfer of shares of stock to a trust because a general assignment of personal property did not identify the shares. Nor should there be.

The practice guide, Drafting California Revocable Trusts (Cont.Ed.Bar 4th ed. & Sept. 2009 Supp.; hereafter practice guide), supports our conclusion that it was unnecessary for the General Assignment to identify the Medco stock. The practice guide says that such a general assignment of personal property is a commonly used estate planning tool: “Some practitioners have clients periodically assign all (or substantially all …) assets to the trust so that a Heggstad petition (Prob C § 850(a)(3)) can be used to capture any overlooked items.” (Id., § 21.15, p. 845, citation omitted.) A form provided by the practice guide “for use when the client has assumed full responsibility for funding the trust … can be modified to advise the client to return periodically to execute a general assignment of all or substantially all of their assets to the trust so that aHeggstad petition (Prob C § 850(a)(3)) can be used to capture any later acquired items not titled in the name of the trust.” (Id., § 21.5, p. 837.)

(4) In Estate of Heggstad, supra, 16 Cal.App.4th 943, the settlor stated in writing that real property was transferred to himself as trustee, but he never signed a deed. After the settlor’s death, the appellate court affirmed an order declaring that the real property was an asset of the trust. In concluding “that a transfer of title is not necessary when the settlor declares himself trustee in his own property,” the court relied in part upon an earlier edition of the practice guide. (Id., at p. 950.) The court noted: “While practice guides are not compelling authority, they are persuasive when there is an absence of precedent…. `Textbooks dealing with specialized areas of the law, and works on practice, are persuasive indications of what the prevailing law may be.’ (Witkin, Manual on Appellate Court Opinions (1977) § 69, p. 114.)” (Id., at p. 950, fn. 8.) (5) The Heggstad court also stated that the probate 96*96 court’s jurisdiction over trusts includes the “court’s inherent power to decide all incidental issues necessary to carry out its express powers to supervise the administration of the trust.” (Id., at p. 951.) This power includes the power to add shares of stock to the trust that were omitted because the shares were misplaced.
Disposition
The order denying appellants’ petition to confirm 3,017 shares of Medco stock as an asset of the Trust is reversed. The matter is remanded to the probate court with directions to enter a new order granting the petition. The parties shall bear their own costs on appeal.

Gilbert, P. J., and Coffee, J., concurred.

[1] All statutory references are to the Probate Code unless otherwise stated.

[2] No respondent’s brief has been filed. “[W]e do not treat the failure to file a respondent’s brief as a `default’ (i.e., an admission of error) but examine the record, [appellants’] brief, and any oral argument by appellant[s] to see if [they] support[] any claims of error made by the appellant[s]. [Citations.]” (In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1078, fn. 1 [23 Cal.Rptr.3d 273].)

[3] Section 15207 provides for the creation of an oral trust in personal property. “Under section 15207, `[t]he existence and terms of an oral trust of personal property may be established only by clear and convincing evidence.’ (§ 15207, subd. (a).) `The oral declaration of the settlor, standing alone, is not sufficient evidence of the creation of a trust of personal property.’ (§ 15207, subd. (b).) According to the California Law Revision Commission comment of section 15207, subdivision (b), `delivery of personal property to another person accompanied by an oral declaration by the transferor that the transferee holds it in trust for a beneficiary creates a valid oral trust.’ [Citation.]” (Estate of Gardner (2010) 187 Cal.App.4th 543, 552 [114 Cal.Rptr.3d 16].)

Lack of trust funding and the small probate estate

INTRODUCTION

It seems a day does not go by without speaking to a potential new client regarding their parent’s trust not being properly funded. There are different reasons this happened but the end result is they need to hire an attorney. This blog post focuses on the interplay of the small probate estate and funding a trust post-mortem.

HOW IT HAPPENS

A trust does not get funded for so many reasons. The most common are:

1) Client did trust themselves (or with on-line service or forms) and didn’t get assets into the trust;

2) Client hired a paralegal or inexperienced attorney and they didn’t properly take care of trust funding;

3) An asset was acquired after the trust was established;

4) The asset was an oddball thing that even a good attorney might miss.

IT SEEMS TO OBVIOUS

After death the lack of trust funding always seems so obvious. Of course, you have 20-20 hindsight and you can actually see the asset is NOT IN THE TRUST. However, it’s much harder during life. The most common problem is probably that clients, when they set their trust up, see the asset listed on a schedule of assets and thus assume that means the trust is funded. This is simply not the case. You have to take active steps to “fund” the trust.

WHY SMALL ESTATE

Why does this article focus on small estates?  Quite simply put the vast majority of trust funding omissions can be corrected by a procedure other than a full probate.  The most common choices are:

1) A Heggstad petition (probate code 850);

2) An Affidavit re: real property worth less than $50,000 (probate code 13200);

3) A Succession to real property petition for real property worth less than $150,000 (probate code 13150);

Using one of these three options can clear the vast majority of assets to a trust. NONE of these are full probates.  That’s a totally different thing.

YOUR CASE

If you want to see which options might work for YOUR CASE let us know. We can generally offer a free analysis to make sure your case is done as efficiently and economically as possible.

Getting creative in a Heggstad petition

We have talked before about the basics of a Heggstad petition. You have assets outside of a trust, after death, and want to get them into the trust without a full probate petition.  A Heggstad petition, pursuant to California probate code 850, is an incredible way to achieve this goal.

The key with a Heggstad is showing INTENT!  That is, showing that the decedent really did intend for the assets to be in the trust. This is often established by an asset being listed on an attached schedule of assets, a mention of the asset specifically within the trust, or a separate general transfer document.

However, what else can you look for?  Certainly mentioning the pour over will is a good idea as it shows intent. Another idea I was able to employ recently in a Heggstad petition was looking at the decedent’s written wishes given to the estate planning attorney. The attorney, unfortunately, failed to follow those written wishes. However, luckily the widow has hired me to clean up the mess left behind by the former attorney.

I am liking the chances of success as the decedent wrote his wishes in his own handwriting. It clearly shows written INTENT to get the assets into the trust.

If you want to discuss your post-mortem trust funding situation with a qualified Heggstad attorney call me!  -John

Hire experience not off a list

I often clean up other attorneys work after death.  I have one right now that is very typical of what I see.  Couple in their early 40′s find out the husband has terminal cancer so they immediately seek out an estate planning attorney to protect the wife and young child. The husband’s employer has some list of attorneys available for a discounted fee.  Well, you can already see where this is going but read on please.

The attorney does a capable job of putting the documents together. There are certainly things in the trust I would do different but the trust is fine.  However, the attorney didn’t even attempt to get any assets into the trust except for the house.  Again, let me remind you the husband has TERMINAL CANCER.

The husband has now died and this young widow has hired me to get the assets into the trust as she knows I am an expert at Heggstad petitions.  We look for two things before filing a Heggstad: 1) were assets listed on a schedule of assets and 2) was there a general transfer document. In this case the answer is NO to both questions.  The attorney didn’t contact the financial institutions and didn’t even list the assets on the schedule of assets.

My client and I agree a written declaration by this attorney acknolweding the deceased’s intent would be valuable in supporting a Heggstad petition. I prepared the document and we emailed the document to the drafting attorney to sign.

This is not a joke what I type next.  He set up a trust for a man with terminal cancer and didn’t even try to find the trust.  He then has the gall to suggest to the young widow that he will charge her for signing the declaration.  Sadly this is why lawyers have a bad name.

Don’t let your family fall victim to this kind of work. Hire an experienced estate planning attorney!

-John

Assigning note and deed of trust to a trust

I am working on a case right now which reminds one of the importance of fully funding your trust. The decedent was owed money (i.e. a promissory note) but failed to transfer that to their trust. They died.  After death the people stopped making payments on the note. The family wants to foreclose but guess what?  They need to go to probate Court to get that power.  The problem is since the note and deed of trust are not in the trust the surviving family members, the successor trustees, do not have the legal authority to initiate foreclosure.  It’s possible that a Heggstad petition will work and it’s possible a full probate will be required. In any event it’s a great reminder about the need to FUND YOUR TRUST FULLY!

Ratings and Reviews

10.0John Bernard Palley
Wealth Counsel Member
2015 Best of the Best Badge