What is a Heggstad Petition?
One of the main advantages of a trust is that it avoids probate. A trust can be seen as an investment for the benefit of its beneficiaries. A trust is created during a client’s lifetime so that when the client passes, beneficiaries’ time and money can be saved by avoiding probate. However, in order for a trust to operate properly, it must be funded. If a trust is not properly funded, assets titled outside the trust may still need to pass through probate. Thus, it is of the upmost importance that the trust remain funded during the life of its creator in order to assure that initial investment pays off.
However, the reality is that often times people simply forget to title assets in the trust, or incorrectly title assets so that they remain outside of the trust. In situations where property remains outside of the trust after the passing of its creator, a Heggstad petition may be used to title the assets back in trust.
What is a Heggstad Petition?
Heggstad petitions, named after the case Estate of Heggstad, allow assets titled outside of the trust to be included in the trust after it has become irrevocable. In Estate of Heggstad, the decedent had real property titled in trust. In order to refinance the property, he transferred title to his own name, outside of the trust. Before he could transfer the property back to the trust, he died. The decedent’s surviving spouse argued that the property should be part of the estate. The decedent’s son, who was the successor trustee, argued that the decedent intended for the property to be part of the trust even though the decedent failed to re-title the property in the name of the trust. The court ultimately sided with the son, and the property was distributed through the trust.
Statutory authority for Heggstad petitions is derived from Probate Code Section 850(a)(3)(B). Section 850(a)(3)(B) provides that trustees, or any interested person, may file a petition requesting that property that is claimed to another be titled in trust.
Important Elements in a Heggstad Petition
The key to a successful Heggstad petition is establishing intent. A successful Heggstad petition will prove to the court that the decedent intended to include omitted assets in their revocable trust. Intent can be established in the following ways:
- The asset was listed in the trust’s schedule of assets when the trust was created
- A general assignment of real or personal property exists in the trust
- The existence of a pourover will
- Real property titled in the trust was removed to refinance, but never re-titled in the name of the trust (similar to Estate of Heggstad).
- Other documents establishing intent on behalf of the decedent
Judges will also look to see if the involved parties are not in conflict. If all parties entitled to notice are in consent, the petition is more likely to be successful.
What Documents are Needed to File a Heggstad Petition?
Specific information is needed to file a Heggstad petition. The following information must be included:
- A copy of the trust;
- A copy of the trust’s schedule of assets;
- Relevant decedent and beneficiary information;
- A copy of the pourover will lodged with the court;
- Descriptions of the assets in question; and
- Documentation establishing intent.
When Shouldn’t a Heggstad Petition be Used?
In the following instances, a Heggstad petition may not be appropriate:
- When the asset is jointly held, for example, a jointly held bank account;
- Assets with beneficiary designations; and
- Pay on death or transfer on death accounts
In the examples above, Heggstad petitions may not be appropriate because the assets will transfer outside of probate according to their designations. Additionally, when an account has a joint owner or a beneficiary designation, there is a strong showing that the decedent did not intend for the asset to pass through trust.
In the event that assets are titled outside of a trust in which you are a beneficiary or trustee, contact an experienced estate planning attorney to determine whether a Heggstad petition may be appropriate. An experienced attorney can help walk you through the process, and prepare a Heggstad petition in situations where appropriate.
