On Schedule

Most Estate Plans utilize a Revocable Living Trust as the primary legal document that governs the management and distribution of one's assets in the event of incapacity and upon death.  One of the main reasons that Revocable Living Trusts are so popular is the fact that they allow the avoidance of Probate.  Rather than subjecting your loved ones to an expensive, time-consuming, public, court-supervised process, a Revocable Living Trust allows your representative to take inventory of your estate, pay your taxes and creditors, and distribute your assets to your loved ones privately, without court-supervision.  Although there is still a process involved, Trust Administration is faster and less expensive than a probate.

The key to effectively avoiding probate with a Revocable Living Trust is to make sure that assets are titled to the Trust.  This means that the financial institutions need to change the owner of record from the individual client to the Trust.  Stocks held in certificate form showing the individual as the owner should be swapped for stock certificates showing the Trust as the owner.  Real property such as houses, condominiums, commercial real estate, and vacant land should be re-deeded to the Trust.  Mobile homes should be re-registered to the name of the Trust.  Even timeshares should be re-titled to the Trust.

It can be very complicated and time-consuming in order to re-title one's assets to a Trust.  However, failing to do so may cause an unintentional probate – the very scenario most clients attempt to avoid by taking the time and effort to create a Revocable Living Trust.  Furthermore, it takes time to re-title one's assets to a Trust and something could happen in between the time a Trust is created and the time that assets are re-titled to a Trust.  Fortunately, California offers a saving grace, known as a Heggstad Petition.

On October 20, 1990, Halvard L. Heggstad died.  He had executed a Revocable Living Trust a year earlier and re-titled all of his assets to his Trust except for an interest in real property located in Menlo Park.  At the same time, he listed all of his assets – including his interest in the Menlo Park real property – on a "Schedule A" attached to his Trust.  The Trust referred to the "Schedule A" and stated that it was Mr. Heggstad's intent to transfer all of the assets listed on "Schedule A" to his Trust.   In a 1993 case, the Court ruled that because he demonstrated his intent to transfer his interest in the Menlo Park real property to his trust by listing it on the "Schedule A," the property was in the Trust and thus a probate was not necessary.

Subsequently, there have been numerous cases with the same facts: a person died with assets titled to the individual's name but there was a "Schedule A" or other written document that expressed the person's intent to transfer that asset into the Trust.  This kind of case is known as a "Heggstad Petition."  If you can demonstrate some written intent to transfer the property into the Trust, courts will typically rule that such property is in fact in the Trust and that a probate is not necessary.  As a result, a simple stopgap measure for avoiding a probate is to take the time to make a list of assets you intend to transfer into the Trust by completing a "Schedule A."  I usually have my clients sign their "Schedule A" for added protection though it is not necessary.  While it is still best to make sure assets are re-titled to the Trust, executing a "Schedule A" contemporaneously with executing a Trust is an easy way to ensure that the Trust carries out its objectives in avoiding probate.