by John T. Anderson, Chairman
Certified Specialist in Estate Planning, Trust
and Probate Law by the State Bar of California,
Board of Legal Specialization
NOTE: Darciann Horton, our Long Beach Probate Attorney, has changed her office hours in Long Beach. They will now be Wednesday from 10-12 and Thursday from 1-3.
At the September 2009 meeting of the Orange County Trusts and Estate Section, speaker Jeremy B. Crickard, Esq. presented some thoughts on “Heggstad and the Unfunded Trust–Postmortem Planning to Avoid Probate.” Mr. Crickard is the author of an article in the Fall 2008 California Trusts and Estates Quarterly Vol 14, Issue 3, entitled, “A Practitioner’s Guide to Heggstad Petitions.” I had previously read the article and I have written several articles on Heggstad itself, the cite for which is Estate of Heggstad (1993) 16 Cal.App.4th 943.
There has been widespread use of this case by practitioners to fund or re-fund living trusts after the Settlor’s death and a difference of opinion by courts (important) and practitioners (less-so) as to its application. In some courts the bottom-line is that Settlor’s Will leaves assets to the Trust so the outcome will be the same; absent a Probate and resultant Probate fees. Some courts accept that ultimate argument/plea and others reject it as irrelevant.
A. The speaker first presented a summary of methods for avoiding Probate.
§13100 Affidavit for transferring personal property within current fair marketvalue of $100,000 or less. §13050 excludes some property, as does §13500 (spousal property) and §13600 (up to $5,000 in salary or compensation. §13006 sets forth who can used §13100 (Beneficiary of Will, Decedent’s Intestate Heirs and Sister-State Personal Representative).
B. Next was an Order Determining Title to Decedent’s Property under §13150 et. seq.
§13150 is for use with real or personal property with a current value of $100,000 or less. §13006 sets forth that the Successor of Decedent can use this provision. It requires an Inventory and Appraisal. A court order is the result.
C. An Affidavit Procedure for Real Property with a gross value of $20,000 or less is provided for in §13200. Six months must have passed since Decedent’s date of death. The resultant court order is the equivalent of an Order for Distribution.
D. §13500 et seq provides for the passage of property to the Surviving Spouse with formal administration. This method can be used by the Surviving Spouse or Domestic Partner regarding property left to that person by Will or intestate succession. A 40 day survival period is required. The court order is conclusive, but the recipient is liable for decedent’s debts.
E. §13600 allows the surviving spouse or domestic partner to collect up to $5,000 in wages or benefits.
F. The speaker advised NOT to use Summary Proceedings when there are:
(1) Debt/liability issues (no statutory claim period);
(2) Disputes over person(s) entitled to inherit (no means to resolve multiple claims).
G. Heggstad Petitions
There is no direct statutory support for these. It is primarily caselaw. California has supervised probate; some states do not–or have limits. California has had a rise in revocable trusts not seen in many states. Heggstad has been defined, incorrectly, as “I’d really like to avoid probate.”
Heggstad had a Trust and a Pourover Will. Schedule A of the Trust listed a partnership in a piece of property. Actually, he owned a 38% interest as a tenant-in-common. Months later, he re-married. He did not amend his Will or Trust post-marriage. He died and his son was appointed Successor Trustee and Executor. Son filed a Petition for Instructions (Probate Code §17200). Wife objected, claiming that it was not a proper action; and she filed as a pretermitted heir. The Trial Court sided with the son, finding that the Declaration of Trust that Mr. Heggstad had set-up held the property as Trusteee and that was sufficient.
If you (Settlor/Trustor) are the Trustee, §15200(a) a declaration that the asset is Trust property. If another person is Trustee, §15200(b) requires a “Transfer”, so the Court found a deed was not required. §15206 (The Statute of Frauds) requires a writing. So a written declaration describing the asset sufficiently on Schedule “A” is required.
Successful filing of Heggstad:
1. Trustor/Trustee declaration of Trust with property set forth;
2. Co-Trustee. Will a Declaration of Trust work or is a transfer needed? In the unpublished case Estate of Santo 2008 there was a refi-deed out of trust with no transfer back into the Trust. Wife then died and one son became co-Trustee with dad. The Trustee filed a Petition to have the property declared to be part of the trust, but the other son contests the action. The Court found that Heggstad was inapplicable; the property was taken out of the Trust and there was no proof of an intent to put it back. To put it into the trust with a co-Trustee involved you must make a transfer.
3. Independent Trustee. Heggstad is not applicable, although some courts are granting them.
4. Personal Property. There is no concern with Statute of Frauds. You could have an oral trust (something more than an oral declaration of Settlor).
5. Property Description. Need not be perfect. Heggstad had the correct address, not interest (partnership vs. tenants in common). Evid Cod §662-overcome deficiency. “All my assets” is not sufficient.
6. Use care using a General Assignment as it might sweep assets into the Trust which were not intended and/or cause tax consequences such as with retirement accounts.
7. Pay on Death Accounts versus later trust amendment listing those accounts-may bring them into the trust.
8. Gerrity vs. Lyons was unpublished two weeks ago. Husband had inherited from his parents and made a General Assignment to a Trust, but no deed to the trust was done. The Court said that the General Assignment is not sufficient; you need “general certainty” such as an address/map.
9. Probate Code §850 Petition based on Heaps might work to get property back into Trust.
Heaps v. Heaps (2004) 124 Cal.App.4th 286
Nominee Clause. In trust paragraph, title can be held in various vestings and still be in Trust.
John T. Anderson, Section Chair
Certified Specialist in Probate, Trust and Estate Planning
By the California State Bar Board of Legal Specialization