Are you a trustee and trying to sell your parent’s or spouse’s house after they have passed away? Did he or she have a Trust, but the house was in his or her individual name (not in Trust)? An all too common problem. Enter the Estate of Heggstad to the rescue!
The Problem: House Was Not in Trust at Time of Death
Before we get to the solution, let’s make sure we understand the common scenarios that cause the problem.
Scenario 1: Your mom has passed away and she owned a house in Orange County. She had a Trust, but for some reason, the house was not in the Trust when she passed away.
Scenario 2: You and your husband owned a house, but upon your husband’s death, the house was in his name, not your Trust.
Scenario 3: You are the trustee of any Trust, in which certain real property was not in Trust at time of death.
These scenarios usually happen for 1 of 2 reasons: 1) The attorney (or Legal Zoom) assisting with the estate planning failed to put the house in Trust at the time the estate plan was created; or 2) The house was in Trust, but had to be taken out for refinancing and was never put back in.
You will usually learn that there is a problem after you decide to sell the house. You hired a realtor, and she or the title company informs you that you can’t sell the property because your name isn’t on the house. They may tell you that the house must go through Probate. They are correct, Probate is an option, but often times it is not the only option, and almost always not the best option.
The Solution: The Heggstad Petition
What is a Heggstad Petition? A Heggstad Petition is a petition asking the court to transfer real property (the house) to a Trust after death. Once the property is transferred to the Trust, you as Trustee can sell the house, or transfer it to the proper beneficiaries. The name Heggstad is derived from the seminal case on this issue. In Heggstad, the settlor declared in his Trust that the assets he listed on Schedule A were assets of the Trust. Schedule A specifically identified the house as a Trust asset. The court found that a settlor can show an intent to create a trust in his or her property by declaring himself or herself trustee of the property.
Why is it better than Probate? Two reasons: 1) It is faster than Probate. Probate usually takes 1 – 2 years. A Heggstad Petition takes a couple of months. 2) It is cheaper. There are less court costs and the attorney’s fees are generally cheaper as well.
Requirements for a Successful Heggstad Petition
- The decedent must have had a Trust. Without a Trust, the house will have to go through Probate.
- The decedent must have had the intent to make his or her house a Trust asset. The most common way to prove the decedent’s intent is by showing a Schedule attached to the Trust that lists the house as an asset. Also, if the house was previously in Trust, but taken out for refinancing, this may also be evidence that the decedent intended to make the house a Trust asset.
- A well articulated petition. You only get one shot in Court, make it a good one. Make sure to hire an attorney that is experienced with these types of petitions and specializes in Estate Planning, Trust and Probate Law.
Since Heggstad, California courts have continued to honor a settlor’s intention to transfer real property to the settlor’s trust. Most recently, in Ukkestad v RBS Asset Fin., Inc., a California appellate court held that real property may be considered trust property without a formal deed conveyance if a two-pronged test is met: (1) The owner of the real property must be the settlor who established the trust with himself or herself as trustee, and (2) the conveyance must be in writing and describe the real property so that it can be identified with “reasonable certainty” in compliance with the statute of frauds.
Certified Probate and Trust Specialist by the California State Bar
As a Certified Probate and Trust Specialist by the California State Bar, we have the experience and knowledge necessary to assist you with transferring these properties into Trust and avoiding Probate through the use of a Heggstad Petition. We are happy to provide you a complimentary consultation to discuss these complicated issues. Please contact John Wong, Orange County Certified Specialist in Estate Planning, Trust and Probate Law at Modern Wealth Law to discuss your options in more detail.