spotlight on: Heggstad Petitions

Posted by : APD | April 5, 2021

Here is a predicament we see from time to time in our practice.  Elizabeth creates a revocable living trust and intends to fund it with her real property, bank accounts, brokerage accounts and other assets.  All of these assets are listed on a schedule at the back of Elizabeth’s trust.  Elizabeth also executes a general assignment, which assigns all of her property to the trust, and a pour-over will, which devises all of her assets to the trust.  Elizabeth is the sole trustee and beneficiary during her lifetime and upon death her sister Margaret steps in as trustee to administer the trust for the benefit of Elizabeth’s beneficiaries.

Margaret discovers that somehow one of the assets slipped through the cracks – maybe Elizabeth neglected to transfer it to her trust or maybe the financial institution neglected to change title to the account despite Elizabeth’s instructions.  Let’s assume it is brokerage account valued at $500,000 when Elizabeth dies.  If a person dies in California owning more than $166,250 in her individual name, a probate may be required.  Assets in a trust are of course not subject to probate.  A probate of an estate valued at $500,000 would incur $26,000 in attorney’s fees and executor’s fees, not including costs, and could take upwards of a year to conclude.

I say “may be required” because there are sometimes alternatives to a full probate.  In this case we would absolutely advise the trustee to go the way of a Heggstad petition.  This is a petition brought under California Probate Code § 850, colloquially named after the 1993 appellate decision, Estate of Heggstad.  Probate Code § 850 is a powerful tool and one of the situations it addresses is where “the trustee has a claim to the real or personal properly, title to or possession of which is held by another.”  Here Margaret as trustee has a claim to the brokerage account titled in Elizabeth’s name.

A Heggstad petition is premised on the fact that the decedent intended to include all her assets in the trust.  Here we have good evidence of Elizabeth’s intent – the brokerage account is identified on the schedule of assets, is generally referenced by the assignment, and would be distributed to the trust in a probate of the pour-over will.  No one element such as identification on the schedule of assets is necessary or sufficient; a court will look at the totality of elements present.

As with any petition involving a trust, the Heggstad petition requires 30 days’ notice be given to trust beneficiaries and legal heirs, after which there will be a hearing.  If our petition is well-supported by evidence of Elizabeth’s intent and there is no formal opposition, I would anticipate court approval at that first hearing.  With the order in hand confirming the brokerage account is part of the trust, the trustee can marshal that asset and proceed with the trust administration.  Margaret will have saved the trust and its beneficiaries significant time and expense, and upheld Elizabeth’s intent.