Latest Update on Heggstad Petitions
As discussed in our blog on Heggstad petitions, revocable living trusts may be funded from property that is not identified by deed or otherwise titled as assets of the trust by filing a petition with the Probate Court, which seeks an order declaring that the unidentified property shall be assets of the trust. With the court order in hand, the lending institution will allow the transfer of the funds into the trust. Alternatively, if the asset is real property, the court order can be recorded, having the legal effect of transferring title to the trust, or to the trustee.
The issue presented to courts in Heggstad petitions is whether there is admissible evidence to establish that the settlor of the trust intended the property to be assets of the trust. Rules of evidence and law will be considered by the court in making this determination. Questions about trusts? A Roseville estate planning attorney of NewPoint Law Group, LLP can assist with your legal concerns.
Typically, a trust will specifically identify the real property and personal property with particularity in the trust property schedules, which is submitted as evidence of the settlor’s intent. In such cases, judges will typically rule that the trust document itself is evidence of the settlor’s intent that the assets are intended to be assets of the trust.
What if the Assets Are Not Specifically Identified in the Trust?
The answer to this question was recently answered in the Fourth Appellate District case of Ukkestad v. RBS Asset Finance, Inc. in April, 2015.
In Ukkestad, the trustee filed a Heggstad petition for an order declaring that two parcels of real property, one in Vista and the other in Indio, were intended by the settlor to be assets of the Larry Gene Mabee Revocable Trust. The evidence submitted included a copy of the trust document. The trust instrument did not identify or describe the two parcels. Instead, petitioner relied on certain general language in the trust which stated:
“The Grantor [i.e., Mabee], by the execution of this instrument, 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, including all Tangible Personal Property, stocks, bonds, cash, mutual funds and promissory notes, all amounts on deposit from time to time at any bank, savings and loan association or investment institution, real property, leases on real property, interests in business entities and all other property owned by the Grantor, wherever situated […] The Grantor intends this assignment to be effective as of the date of this instrument even though other documents may be necessary to perfect title to such property in the name of the Trustees.”
The Probate Court judge denied the Heggstad Petition with prejudice. The basis of the Court’s decision was that the two parcels were not assets of the trust because the Trust Agreement did not satisfy the requirements of the statute of frauds, with respect to the two parcels. The petitioner appealed the order.
The Court of Appeal for the Fourth Appellate District reversed. The issue as framed by the appellate court was whether Mabee’s statement in the Trust Instrument that he conveyed “all of his real and personal property” to the trustee, including “real property…wherever situated,” was sufficient to comply with the statute of frauds and therefore legally conveyed the Two Parcels to the Trust.
In its analysis, the Court of Appeal concluded that there were no disputed issues of fact, and its decision was based upon a “de novo” review of the law concerning the application of the statue of frauds for real property.
The Court did note that there were older cases concerning the application of the statute of frauds, which required the specific identification of the real property in question. However, the California Supreme Court in Sterling v. Taylor (2007) 40 Cal. 4th 757, 772 endorsed a more “flexible, pragmatic view.” Thus, in Sterling, the governing principle is: “‘That is certain which can be made certain.’ […If] a memorandum includes the essential terms of the parties’ agreement, but the meaning of those terms is unclear, the memorandum is sufficient under the statute of frauds if extrinsic evidence clarifies the terms with reasonable certainty and the evidence as a while demonstrates that the parties intended to be bound.”
Real Property and Osswald
In the context of a trust funding issue, the Court distinguished the case of Osswald v. Anderson (1996) 49 Cal.App.4th 812, 818, where it appeared that the trustor intended to include his residence in this trust by referring to a Schedule A (and it was not prepared or attached to the trust). In that case, no property was identified or described in any way. Thus, extrinsic evidence was not allowed to explain the trust when it did not identify any real property. In Osswald, the court properly denied the Heggstad petition.
Applying the “flexible, pragmatic view” of Sterling, and contrasting Osswald, the Court noted that the Trust in the case at bar did refer to “all real and personal property, including […] real property […] wheresoever situated.” It was then possible by resorting to extrinsic evidence consistent with the general terms of the trust; it determined that Mabee held title to the two parcels, and as such, the statute of frauds created no bar to Ukkestad’s petition for an order to confirm the two parcels as part of the trust’s assets.
What Is to Be Learned About Trusts and Estate Planning from Ukkestad?
Practitioners should include a general clause similar to what was used in the Ukkestad Trust as a backup in the event of an error or omission where the property is not described, or does not identify any property scheduled in the trust.
Does your trust have a general clause including all personal and real property wheresoever situated? If not, it should, just in case the property schedule is omitted or the property is later sold, and the replacement property in not deeded into the trust or identified in the revised property schedule. We invite potential clients to dust off their trust documents and examine this issue. If your trust does not have the language similar to that described in Ukkestad, consider amending your trust to include it.
Get Assistance from a Sacramento Area Trust Attorney
A Roseville trust attorney at NewPoint Law Group, LLP will have extensive experience in amending trusts, and we would be happy to serve your needs in such matters. If you require assistance in this process, please contact us to schedule an appointment at 800-358-0305.