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Estate Planning and the Heggstad Petition

We noted in our last article on estate planning one of the cruelties of COVID-19: it leaves infected patients with only minutes to say their final goodbyes to loved ones, and no appreciable opportunity to settle their affairs. We, therefore, encouraged everyone, when they still have the capacity to do so, to set up an estate plan consisting of a will, living trust, general durable power of attorney, and an advance health care directive.

We also noted the importance of a living trust. A trust must be created in order to avoid a probate process that is extremely expensive and potentially contentious.

A trust declaration is the legal document through which a trust is created. It specifies, among other things, what real property and assets are being transferred to the trust, how the property and assets should be disposed upon death, and who should take over as trustee when the original trustee either dies or becomes incapacitated.

After the trust declaration is prepared and executed, the trust created by the declaration must be “funded.”

Funding a trust entails transferring the real property and assets the “settlor” – i.e., the person creating the trust – wants in the trust from the settlor to the trust. With bank accounts and other financial assets, this involves having financial institutions retitling the settlor’s accounts as trust accounts. With real property, the settlor must execute and record a quitclaim deed through which he or she relinquishes ownership of the real property to the trust.

Funding a trust has become difficult in light of COVID-19. Many county recorders’ offices and financial institutions are closed for in-person business. Accordingly, settlors are not able to have their quitclaim deeds recorded or their accounts retitled as trust accounts.

What if the unthinkable happens? Is a probate proceeding necessary if the settlor becomes infected with COVID-19 and dies before he or she can transfer real property and assets into the trust?

Under these circumstances, a “Heggstad Petition” may be filed to avoid the probate process.

A “Heggstad Petition” is a petition filed pursuant to section 850 of California’s Probate Code, to confirm that real property and assets declared by the settlor to be in his or her trust is trust property even if not formally transferred by the settlor into the trust.

The term “Heggstad Petition” comes from Estate of Heggstad (1993) 16 Cal.App.4th 943. In the Heggstad case, the settlor, Halvard L. Heggstad, stated in a trust declaration that he has transferred his interest in certain real property to his trust. The property interest was described in a schedule attached to the trust declaration. Before his death, however, Mr. Heggstad did not record a quitclaim deed transferring his property interest into his trust. The question for the Heggstad court, therefore, was whether Mr. Heggstad’s declaration was sufficient or if his property interest had to be disposed by way of a probate proceeding.

The court in Estate of Heggstad held that Mr. Heggstad’s statement in his trust declaration was sufficient to avoid probate even though the property he described was not formally conveyed through a quitclaim deed. The Court held Mr. Heggstad’s declaration sufficient because it clearly identified the real property he transferred into his trust. It bears noting that if Mr. Heggstad did not describe his property interest with sufficient particularity in his trust declaration, that property may have been subjected to the probate process.

If you do not have an estate plan consisting of a will, living trust, general durable power of attorney, and advance medical directive, contact one of our experienced attorneys right away. We may also be able to assist you if a loved one had created a trust but away passed before formally conveying his or her real property and assets into their trust.