A living trust is an important estate planning document that allows your estate to avoid probate. Of course, it is of no use if you fail to transfer your assets into the trust. In this case, when you die, nothing is owned in the name of the trust, so there is nothing to administer according to its terms. With no property, the trust fails altogether.
Sometimes, however, a settlor (the person who creates a trust) intends to transfer property (say a house), but fails to follow through by executing and recording the trust transfer deed. Depending on the circumstances, a trustee may still be able to get an order from the court declaring the house is titled in the trust. This is where a “Heggstad petition” comes in.
Estate of Heggstad
In Estate of Heggstad (16 Cal. App. 4th 943 (1993)), the decedent failed to execute a grant deed transferring a piece of real property to his trust. However, he did identify the property on the “Schedule A” attached to the declaration of trust.
The court determined that the decedent had intended to transfer ownership of the house to the trust, and that a declaration of trust was sufficient to create a trust in such property. A separate trust transfer deed was not required in such a situation.
So essentially, a Heggstad petition asks the court to clarify that a particular asset is owned by the trust, even if it was not formally transferred. The court wants to see both evidence of intent that the asset be held in trust, and that the document evidencing such intent describes the same asset the court is asked to consider.
What can we learn from Heggstad?
The result in Heggstad shows us that all is not lost if a particular asset has not been specifically transferred to the trust. There may be other options if the trust or a related document identifies the property in some way, such as on a schedule or in a separate assignment of property executed by the settlor.
For estate planning purposes though, what is important is to make sure all your assets are properly transferred prior to your death. If the Heggstad petition fails, your property may have to go through probate, and may be distributed under the laws of intestacy, rather than the distribution plan laid out in your trust. Even if the petitioner is successful, a Heggstad petition is still another step to go through that would have been unnecessary with proper estate planning.
Helix Law Firm can help with estate planning and estate administration
If you need a living trust, we can draft one that is right for your needs and help make sure your assets are properly transferred. If you are a trustee and need to petition the court regarding improper or incomplete property transfers, we can help with this as well.
If you're interested in learning more about how Helix can help, please call us at (619) 567-4447 to schedule a free consultation.