For all the usefulness of a living trust (revocable and irrevocable) in the context of estate planning, many planners, unfortunately, fail to transfer the title of their assets to the trust after they create it. Living trusts allow property and assets to be distributed to beneficiaries in an efficient manner (outside of probate court) when the trustor passes away or becomes incapacitated.
What can you do if a loved one failed to title an asset to a trust, though? Do you have to settle the matter in probate court? In California, you might be able to file what’s called a Heggstad Petition.
Who Has Standing to File a Heggstad Petition?
Under California law, a trustee or any interested person has legal standing to file a Heggstad Petition. The trustee is the individual who is named by the trustor (also referred to as the grantor or settlor) to maintain the property and assets contained within the trust. These same individuals must also be served with a legal notice that gives information about a hearing to decide the matter. Parties must be given at least 30 days’ notice prior to the hearing. The original Heggstad Petition needs to contain information that supports the petitioner’s position that the asset(s) in question should actually be considered trust assets.
Schedule of Assets
Typically, a Heggstad Petition is filed because of a disconnect between an asset’s inclusion in a trust’s Schedule of Assets and the way the asset is actually titled. Many trusts contain a Schedule of Assets, which is simply a list of assets that are (purportedly) in the trust. If a decedent’s asset or real property is listed on the Schedule of Assets but is still titled in the decedent’s name, for instance, a trustee or beneficiary might be inclined to file a Heggstad Petition to obtain a court order indicating the asset left out of the trust is actually a trust assets, which will avoid a full probate case. But, if the asset that is not titled to the trust is not listed in the Schedule of Assets, there is a high likelihood that your Heggstad Petition will be rejected by a judge. The best way to prevent a rejection by a judge is to have a General Transfer Document indicating it is the trustor’s intent that all assets (except some like 401(k)s) are trust assets, and not a Schedule of Assets, in your trust. In fact, a Schedule of Assets is often the sign of a poorly drafted trust!
How Can You Prevent the Need for a Heggstad Petition?
Diligently re-titling all of your assets into your living trust is the most effective and efficient way to both prevent the need for a Heggstad Petition and make sure your estate planning documents are doing everything you intend for them to do. To add an extra layer of protection, make sure that your living trust has a General Transfer Document that reads something like, “My intent is to transfer all real property, in my possession now and in the future, to my revocable living trust.”
Attorney Tyler Q. Dahl is Here to Help Make Your Estate Plan
Our firm is well-versed in a wide range of estate planning strategies and tactics, with a special emphasis on helping business owners preserve and pass on their wealth. Attorney Tyler Q. Dahl is also a Certified Tax Coach, which is a certification shared by fewer than 100 attorneys in the U.S. The bottom line is that we’re here to be your long-term advisors. Reach out to us today to set up an initial 30-minute consultation.
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