Estate planning using a living trust is a common tool in California to avoid the costly and time-consuming probate process. A trust can ensure a smooth transfer of assets, including real property, after the death of the trust creator (the “settlor”). However, even well-drafted trusts can encounter complications when it comes to transferring real estate, particularly if the real property is only listed on a schedule to the trust but no deed was signed transferring ownership to the trust.
In these cases, California law provides a solution through what is known as a Heggstad Petition. This blog post will explain what happens when real property is listed on a trust schedule but not properly transferred and how a Heggstad Petition can help.
What is a Heggstad Petition?
A Heggstad Petition is a legal process in California that allows an executor or successor trustee to petition the probate court to confirm that certain assets, including real property, belong to a trust, even if those assets were not formally transferred to the trust before the settlor’s death.
The name comes from the landmark case Heggstad v. Superior Court (1993) 16 Cal. App. 4th 943. In this case, the court ruled that real property that was listed on a schedule attached to a trust, but not formally transferred via deed, could still be considered part of the trust estate, provided there was clear intent by the settlor to include the property in the trust.
Why Does This Issue Arise?
For a trust to own real property, the title to the property must be formally transferred into the name of the trust. This is typically done by signing and recording a deed that transfers ownership from the individual (the settlor) to the trust. For example, the deed would transfer property ownership from “John Doe” to “John Doe, Trustee of the Doe Family Trust.”
However, in some cases, individuals believe they have transferred property to the trust by simply listing it on a schedule attached to the trust document, but they fail to sign a deed. When this happens, the property is technically still held in the individual’s name and would otherwise be subject to probate after their death.
The Role of the Heggstad Petition in Fixing This Problem
The Heggstad Petition can be used by the successor trustee to avoid probate by asking the court to confirm that the property should be treated as part of the trust estate, even though the deed was not formally transferred. The petition argues that the settlor clearly intended the property to be included in the trust, as demonstrated by its listing on the trust’s schedule of assets or other written evidence.
If the court grants the Heggstad Petition, the property is confirmed as part of the trust, allowing it to bypass the probate process. This can save time and legal costs while ensuring the settlor’s wishes are honored.
Requirements for a Successful Heggstad Petition
For a Heggstad Petition to succeed, the court will generally require the following:
Clear Intent: The petition must show clear intent by the settlor to include the property in the trust. This is often established by a schedule of assets or similar document attached to the trust that lists the property in question.
Written Documentation: There must be written evidence of the settlor’s intent. This could include the trust document itself, a schedule of trust assets, or a declaration of intent.
The Trust Is Valid: The trust must be validly executed under California law, meaning it meets all formal requirements for a trust, such as being signed, dated, and properly witnessed (if required).
How to File a Heggstad Petition
Filing a Heggstad Petition involves a legal process that typically requires the assistance of a probate attorney. The following steps outline how the process works:
Prepare the Petition: The successor trustee or other interested party must prepare and file a petition with the probate court. The petition will outline the facts of the case, including the existence of the trust, the listing of the property on the schedule, and the lack of a formally recorded deed.
File the Petition with the Probate Court: The petition is filed with the probate court in the county where the decedent resided. The filing party will also need to serve notice to all beneficiaries and interested parties, informing them of the petition and providing them an opportunity to object.
Attend the Hearing: After filing, a hearing will be scheduled where the court will review the petition. If there are no objections and the court is satisfied that the settlor intended to include the property in the trust, the judge will grant the Heggstad Petition.
Record the Court Order: If the petition is approved, the court order will serve as confirmation that the real property is part of the trust. The successor trustee can then record the order with the county recorder’s office, effectively transferring title of the property to the trust.
Benefits of Using a Heggstad Petition
Using a Heggstad Petition offers several advantages:
Avoiding Probate: The most significant benefit is avoiding probate for the real property in question. Probate can be costly and time-consuming, and the Heggstad Petition provides a way to sidestep it for property that was mistakenly left out of the trust.
Fulfilling the Settlor’s Intent: A Heggstad Petition ensures that the settlor’s wishes regarding the distribution of their property are respected, even if they failed to complete all the necessary paperwork before their death.
Saving Time and Costs: By avoiding probate, the estate can be settled more quickly, and legal fees can be minimized.
Potential Challenges to a Heggstad Petition
While Heggstad Petitions are a powerful tool, they can face challenges, especially from beneficiaries who may benefit from the property going through probate. For example:
Lack of Clear Intent: If the settlor’s intent to include the property in the trust is not clear, the petition may be denied.
Disputes Among Beneficiaries: Beneficiaries may challenge the petition if they believe the property should be distributed differently under probate rules.
Missing Documentation: If no schedule of assets or written declaration is available, proving the settlor’s intent can be difficult.
Conclusion: Preventing the Need for a Heggstad Petition
While a Heggstad Petition can help correct the mistake of failing to formally transfer real property into a trust, it’s best to avoid this situation altogether by ensuring that all assets, especially real estate, are properly transferred into the trust during the settlor’s lifetime.
Working closely with an experienced estate planning attorney can help ensure that all property transfers are completed and that no assets are unintentionally left out of the trust. This way, the estate can avoid the need for a Heggstad Petition and ensure a smoother estate administration process.
If you find yourself in a situation where real property was not formally transferred to a trust, contact the top-rated California probate attorneys Moravec, Varga & Mooney – today to schedule a telephonic consultation. Have questions, call (626) 460-1763 or email LV@MoravecsLaw.com.
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