Heggstad petition – when can you use it?
Heggstad petition should be used in the situation when there is a trust which was not funded properly or property was not listed in the trust at the time at the time of the person’s death. In this situation s the court can determine whether the settlor of the trust had intended to transfer the property at issue to the beneficiary.
Generally is anything that exceeded $166,250 left outside of the trust shall go through probate. By using Heggstad petition you can definitely simplify the process, saving a lot of time and money on the full probate process.
Heggstad petition -what the court is looking for?
How does the court decide if you can use heggstad petition by looking at certain documents in order to make sure that you met the minimum required to show the decedent’s intent to pass the properties left outside the trust to the beneficiaries listed in the trust?
The estate planning attorney assisting you in such a case would first look at the schedule of assets to determine whether the property at issue was included it schedule of assets. If it was included, your attorney would father look at whether the deed transfer property into the trust was prepared and if it was whether any problem with the execution of this deed or recording.
If the deceased did not have the asset listed in this schedule of assets your estate planning attorney will look into whether it was because it was a newly acquired account that he recently
started using just prior to his passing and there is some provision in the trust specifying how are later acquired properties/a accounts shall be handled.
Another way your attorney can proceed with heggstad petition is by looking at certain agreements made. For example, if the decedent is a co-owner with some of the beneficiaries of the trust on certain accounts.
General Reference to Real Property in Trust Sufficient for Heggstad Petition.
What happened with a house in the trust after death if the transfer to the trust was not recorded?
In the recent case Ukkestad v RBS Asset Fin., Inc. (2015) trust provided that the Settlor “hereby assigns, grants and conveys to the Trustees of this instrument all of the Grantor’s right, title and interest in and to all of his real and personal property… wherever situated.”
Settlor had not executed deeds to two properties before his death. After his death, a potential creditor objected to the Trustee’s Heggstad petition claiming that the trust instrument did not satisfy the statute of frauds with respect to the real property. Based on that reasoning, the probate court denied the petition.
The trustee and the creditor settled, so the creditor did not appear in the appeal.
The court of appeal overturned the probate court’s order. It began by explaining that is it “well established that if two specific requirements are met, real property may be made part of a trust’s assets without a separate deed transferring property to the trust.” Those two requirements are:
- The owner of the real property is the Settlor of the trust naming himself or herself as trustee; and
- With respect to real property, compliance with the statute of frauds.
Addressing the statute of frauds issue, the court found that the statute of frauds is satisfied if the identity of the real property can be determined with reasonable certainty. Reasonable certainty is satisfied with either a certain description or by providing a “means or key” which, using extrinsic evidence, can be used to identify the property.
Here, the real property to be conveyed to the trust was identified as all real property owned by the Settlor wherever situated. Using the county records, which are public, as the means or key, the specific parcels of property can be identified. Accordingly, the statute of frauds is satisfied.
Heggstad Petition is regulated by Probate Code 850
Advantages and disadvantages of Heggstad petition
The only disadvantage Hegstad petition is it it get denied your filing fees and attorney fees for the process is lost. The outcome of Heggstad petition as well as many other legal matters is not guaranteed. Most of Heggstad petitions are getting approved by the judge when the proper documents are presented to the court.
The advantages of Heggstad petition is saving between $15,000 and $50,000 ( depending on the value of the estate) in probate fees and saving year/years in the distribution of the assets to the beneficiaries.
Under California law, when utilizing a Heggstad petition, several additional factors and procedures should be considered:
Statutory Basis and Legal Requirements
- Probate Code Section 850: This section allows trustees to petition the court to confirm that assets not formally transferred into a trust are part of the trust estate. The petition is commonly known as a Heggstad petition, stemming from the case Estate of Heggstad (1993).
- Evidence of Intent: Clear and convincing evidence of the settlor’s intent to include specific assets in the trust is crucial. This may include trust documents, schedules of assets, general assignments, or other written declarations.
Procedural Steps for Filing a Heggstad Petition
- Preparation of the Petition: The trustee must prepare a verified petition outlining the facts supporting the inclusion of the property in the trust. Attach relevant documents such as copies of the trust, any schedules of assets, and evidence of the settlor’s intent.
- Filing with the Probate Court: Submit the petition to the appropriate California Superior Court in the county where the trust is administered or where the property is located.
- Notice Requirements: Provide notice of the hearing to all interested parties, including beneficiaries and heirs, in accordance with Probate Code §§ 851 and 17203. This typically involves mailing notice at least 30 days before the hearing.
- Court Hearing: Attend the scheduled hearing where the court will review the petition and any objections. The trustee may need to present testimony or additional evidence supporting the petition.
- Court Order: If granted, the court will issue an order confirming the asset as part of the trust estate, allowing the trustee to administer the asset without going through probate.
Important Considerations
- Specificity in Trust Documents: To strengthen a Heggstad petition, the trust document should specifically describe the assets intended to be included. General assignments are more likely to be accepted if they provide a method to identify the property.
- Statute of Frauds Compliance: For real property, the transfer into the trust must comply with the Statute of Frauds. The trust or accompanying documents should include a sufficient description of the property.
- Potential for Opposition: Be prepared for possible challenges from heirs or creditors who may contest the inclusion of the asset in the trust. Adequate evidence and proper notice can mitigate these risks.
Recent Legal Developments
- Case Law Expansion: Subsequent cases have built upon Estate of Heggstad, further clarifying the requirements for a successful petition. For example, Ukkestad v. RBS Asset Finance, Inc. (2015) reinforced that a general assignment in the trust can be sufficient to include real property if it provides a means to identify the property.
- Legislative Updates: Stay informed about any changes to the Probate Code that may affect the process or requirements for filing a Heggstad petition.
Advantages of a Heggstad Petition
- Cost Efficiency: Significantly reduces legal fees compared to full probate proceedings.
- Time Savings: Accelerates the transfer of assets to beneficiaries, often resolving matters in months rather than years.
- Asset Protection: Helps maintain the privacy of the trust’s contents and the decedent’s estate planning intentions.
Limitations and Risks
- Uncertain Outcomes: Court approval is not guaranteed. Inadequate evidence of intent or procedural errors can lead to denial.
- Legal Expenses if Denied: If the petition is unsuccessful, the costs incurred will not be recoverable, and the asset may need to go through probate.
- Proper Drafting is Essential: Emphasizes the importance of meticulous estate planning and trust drafting to avoid the need for such petitions.
Practical Tips
- Consult an Experienced Attorney: Work with a California estate planning attorney who has expertise in handling Heggstad petitions to navigate the complexities effectively.
- Document Intent Clearly: Encourage clear documentation of asset transfers during the estate planning process to prevent ambiguities.
- Regular Trust Reviews: Periodically review and update the trust to ensure all assets are properly titled and included.
By understanding these additional aspects of filing a Heggstad petition under California law, trustees and beneficiaries can better prepare for the process and increase the likelihood of a favorable outcome.
714-390-3766
