In this post, we are going to examine the concept of a Heggstad petition, a legal tool under California law. But first, to appreciate its value, you need to understand the fundamental role of a living trust.
Living trusts are central to effective estate planning, helping individuals avoid probate and streamline the distribution of assets. Let’s start by exploring how living trusts function before diving into the specifics of the Heggstad petition and its importance.
Understanding the Living Trust
A living trust is a legal document that holds ownership of your assets during your lifetime and directs their distribution after your death. Unlike a will, a living trust allows your heirs to bypass probate, the often time-consuming and costly legal process required to validate a will.
When you create a living trust, you (the grantor) transfer ownership of your property into the trust. While the trust becomes the legal owner, you maintain control over the assets as the trustee.
Upon your incapacity or death, a successor trustee takes over to manage or distribute the assets according to your wishes.
Benefits of a Living Trust
Probate Avoidance: One of the most significant advantages of a living trust is avoiding probate. Probate can take months or even years to complete and often incurs substantial costs.
Privacy: Unlike a will, which becomes public during probate, a living trust remains private. This ensures that the details of your estate are not accessible to the public.
Incapacity Planning: A living trust also addresses the possibility of incapacity. If you are unable to manage your affairs, your successor trustee can step in to handle your finances without requiring court intervention.
Funding the Trust
To fully realize the benefits of a living trust, you must transfer ownership of your assets into the trust.
This process, known as funding the trust, includes retitling real estate, bank accounts, and other property in the name of the trust. Assets left outside the trust may still require probate, diminishing the trust’s effectiveness.
The Problem of Unfunded Assets
Despite the benefits of a living trust, it’s not uncommon for assets to be unintentionally left out. For example, you might acquire a new property but forget to transfer it into the trust.
In such cases, these assets are subject to probate unless other measures are in place.
This is where the Heggstad petition becomes invaluable. But before discussing how it works, it’s essential to understand the role of a pour-over will in addressing personally held assets.
The Pour-Over Will
A pour-over will serves as a safety net for assets that are not transferred into the trust during your lifetime. This document directs property to be “poured over” into the trust upon your death.
While a pour-over will ensure that your assets ultimately end up in the trust, it does not bypass probate. Assets covered by the will must go through probate before being transferred to the trust.
For this reason, it’s critical to fund your trust during your lifetime and minimize reliance on the pour-over will. However, even with careful planning, some assets may still slip through the cracks. This is where the Heggstad petition becomes a powerful tool.
What Is a Heggstad Petition?
The Heggstad petition derives its name from the landmark California case, Estate of Heggstad. In this case, the court ruled that property intended to be part of a trust could bypass probate if clear evidence exists that the grantor intended to transfer the property into the trust.
The Heggstad petition is a legal document filed with the court to establish that an asset belongs to the trust. By doing so, it allows the property to avoid probate, saving time and costs for the estate.
How a Heggstad Petition Works
To use a Heggstad petition, you must demonstrate that the grantor intended to include the unfunded asset in the trust. This typically involves presenting the trust document and other evidence, such as a schedule of trust assets, showing the property was listed or intended for inclusion.
The process begins with filing the petition in probate court. If the court agrees that the asset was meant to be part of the trust, it will issue an order declaring the property as trust property. This allows the trustee to manage or distribute the asset without probate.
Benefits of a Heggstad Petition
Avoiding Probate: The primary benefit of a Heggstad petition is avoiding probate for assets that are outside of the trust. This aligns with the trust’s overall goal of streamlining the estate administration process.
Preserving Intent: A Heggstad petition ensures that the grantor’s intentions are honored, even if the formal transfer process was incomplete.
Cost Efficiency: While filing a Heggstad petition involves some legal fees, it is generally less expensive than going through probate.
When to Use a Heggstad Petition
The Heggstad petition is most commonly used for real estate, which is often left unfunded due to oversight. However, it can apply to other assets as well, provided there is sufficient evidence of intent.
Practical Scenarios
Newly Acquired Property: If you purchase property shortly before your death and do not have time to transfer it into the trust, a Heggstad petition can resolve the issue.
Incomplete Funding: If certain assets were omitted from the trust during the funding process, the petition can ensure they are included.
Limitations
It’s important to note that the success of a Heggstad petition depends on the availability of clear evidence. If the trust document or other records do not reflect the grantor’s intent, the petition may be denied, resulting in probate.
Combining a Living Trust, Pour-Over Will, and Heggstad Petition
An effective estate plan combines multiple tools to address potential gaps. While a living trust is the cornerstone of the plan, a pour-over will acts as a safety net, and a Heggstad petition serves as a remedy for oversights.
Together, these elements ensure that your estate is handled according to your wishes with minimal delays and costs.
Importance of Regular Reviews
To reduce the likelihood of relying on a Heggstad petition, it’s essential to review your estate plan regularly. Life changes such as marriage, divorce, or acquiring new property may require updates to your trust.
By keeping your plan current, you can avoid potential issues and ensure all assets are properly funded into the trust.
Final Thoughts
A living trust is a powerful tool for avoiding probate and simplifying the distribution of assets. However, even the best plans can encounter oversights, leaving some assets out of the trust.
The Heggstad petition provides a solution, allowing these assets to be included in the trust without going through probate. When combined with a pour-over will, it forms part of a comprehensive strategy to safeguard your estate and honor your wishes.
Schedule a Consultation Today!
We can help if you’re ready to work with a Chico, CA estate planning lawyer to put a plan in place. You can send us a message to request a consultation appointment or call us at 530-343-3454.