Trusts are very useful tools in estate planning: in addition to helping us gift assets to others, they allow us to make arrangements for our own care as we age. Once a trust is established, the designated assets need to be transferred into the trust. What if that does not happen? In California, a Heggstad Petition can help.
Timing Is Everything
Ideally, we each get around to developing our care and estate plans before we actually need them, but time is not always on our side. Establishing a trust requires working with a lawyer to create it, and then funding the trust by transferring each of the targeted assets into it. This takes some time and energy, and until assets are actually transferred into the trust, it has no value. As Kiplinger explains: “Many people assume that once they sign the trust documents at their attorney’s office, they are ready to roll. Setting up a trust, however, is only half of the solution. For a revocable living trust to take effect, it should be funded by transferring certain assets into the trust. Often people fund a living trust with real estate, financial accounts, life insurance, annuity certificates, personal property, business interests and other assets.”
As the saying goes, there are no guarantees in life, and it can happen that the trustor—person establishing the trust—becomes incapacitated or dies before completing the process of transferring assets into the trust. In California, this is where the Heggstad Petition comes in handy, as Absolute Trust Counsel explains:
Heggstad petitions are named after the California court case, Estate of Heggstad. Mr. Heggstad created a living trust and identified the assets he wanted in the trust by filling out a schedule of assets attached to his trust. Unfortunately, Mr. Heggstad died before he could retitle those assets into the name of his trust. Wanting to avoid a full probate of his estate, his family petitioned the court, arguing that because he filled out the schedule of assets with his trust, Mr. Heggstad intended for those assets to be included in his trust. The court agreed and ruled that the assets listed on a schedule attached to a trust was sufficient evidence of intent to include those assets in the trust. This case paved the way for a regularly used petition to the court, called a Heggstad petition.
Seeing Intentions Through: Trustees
When working with a lawyer to establish a trust, it’s important to incorporate as much detail as possible about its purpose and terms into the trust agreement—as well as to detail the assets to be placed in it. Additionally, be diligent about selecting and preparing a trustee to administer the trust. You can learn more about the essential duties of trustees right here. It’s helpful to know that trustees have a fiduciary responsibility to exercise reasonable care and skill in managing the assets of the trust. Accordingly, the trust agreement may require a trustee bond, which is a specific type of fiduciary bond that protects the interests of the trust and its beneficiaries in accordance with applicable state law. Trustee bonds can be obtained quickly and easily—in just a few clicks—from Colonial Surety.
In California, in the event assets are not successfully transferred into a trust prior to the trustor’s death, the appointed trustee can make a Heggstad Petition, with the help of an attorney:
The trustee will need to provide as much information as they can about the assets, a copy of the will and trust, and names and addresses for all of the people who are entitled to notice. The attorney will draft the petition and have the trustee review it and sign it, and then it will be filed with the court of the appropriate county. The trustee must give all people entitled to notice at least 30 days’ notice before the hearing….At the hearing, all noticed parties will have a chance to object….If there are no objections, the judge may grant the petition at the hearing, and the Heggstad petition is complete. The judge will sign an order that the trustee can present to the banks, and the same order can be recorded with the county to show that any real estate is transferred into the trust.
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