A well-known fact that bears repeating is that an irrevocable trust is only good for avoiding probate to the extent it is actually funded with assets. If California’s summary probate procedures are unavailable (a topic for another blog) the personal representative of a decedent’s estate may need to resort to probating assets that are not titled in the name of the decedent’s trust as of their date of death.  A common example is when a settlor lists real property (e.g. their residence) on a schedule (the ubiquitous Schedule “A”) that designates the property the settlor transferred to their trust, but fails to record a deed conveying the property to the trust prior to their death.

The solution to this conundrum is to file what is known as a Heggstad petition to get a court order declaring the property listed on the trust schedule is a trust asset, despite the settlor’s failure to formally transfer the asset to the trust.   Probate Code Section 850 incorporates the court’s ruling in the Estate of Heggstad (1993) 16 CA4th 943, 20 CR2d 433.  In Heggstad, the court held that a written declaration of trust by the owner of real property that included an attached schedule listing the specific property was sufficient to transfer the property into the trust despite the lack of a formal conveyance.  But what happens if the settlor fails to specifically list an asset on their Schedule “A”?

What could have been fatal to any would-be Heggstad petitioner may be salvageable under a recent case from the Fourth District of Appeals, Ukkestad v. RBS Asset Finance, Inc. In Ukkestad, a decedent owned two parcels of real property which were titled in the name of the decedent, not his trust. Ukkestad v. RBS Asset Finance, Inc., (2015) 235 Cal. App. 4th 156.  The probate court denied the filed Heggstad petition since the decedent’s trust failed to include a specific description of the real property.

The Ukkestad court reversed the probate court’s decision holding that the trust declaration’s general language providing for assignment of “all of the Grantor’s right, title and interest in and to all of his real and personal property… owned by the Grantor, wherever situated” was in fact sufficient to transfer the real properties into the decedent’s trust since it was possible to refer to public records to determine the decedent’s ownership of the real property.  The key was that despite the fact the property was not specifically listed (i.e., an address or legal description), the trust declaration expressly stated that the settlor transferred “all” of his property to his trust, and public records (i.e. recorded deeds) could be used as extrinsic evidence to show the settlor in fact owned the property prior to the transfer.

Ukkestad greatly expands the holding of Heggstad and makes the filing of a successful Heggstad petition easier in many cases if a drafter is careful to insert language which would comport with Ukkestad regarding the transfer of “all” of the settlor’s property.  Of course the best practice remains to formally title assets in the name of the trust soon after its creation, but it is helpful to know there are options if something goes awry.

 

 

 

 

 

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About Erik K. Dodd

Erik K. Dodd is a Riverside and Temecula corporate and business law attorney with Reid & Hellyer's Temecula office. He is skilled in mergers & acquisitions, contracts, business formation, succession and dissolution, corporate governance and trademarks. He is a member of the Riverside County Bar Association.

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