A Trust Needs to Be Funded To Be Valid
I was reading my parent’s trust documents recently. I called my dad up and asked him a few questions about the process he went through. That’s another post for another time. I would like to tell you that he paid big bucks for a trust to be formed. At the time, his houses were put in the trust. Since then, he has sold both and moved, AND acquired a rental house.
None of the new properties are in the trust. He asked his lawyer about it and was told not to worry about it. The pourover will catches all that property and puts it into the trust.
And it does.
AFTER IT GOES THROUGH PROBATE.
One of the biggest reasons to form a trust in the first place is to avoid probate! We are both wondering why the lawyer would say this.
Perhaps they are thinking of a Heggstad** petition, based on the case by the same name (probate Code 850). If your trust includes a list of assets you want in the trust, along with a statement of conveyance, your heirs can petition the court to have those assets included in the trust. Or, maybe they are thinking of the 2015 update to this idea of “I forgot to fund my trust” with the Ukkestad case *** where the court ruled that specific language in the trust could be a substitute for actual titling the property in the name of the trust. A simple provision stating something to the effect of “all my real property” in just the right place of the trust will suffice.
Both of these remedies to an unfunded trust avoids a full probate. But it still goes through the courts, which is what we are trying to avoid. Your heirs will be dealing with the grief of your absence: they shouldn’t have to deal with grief from the courts.
You MUST title your property in the name of your trust if you want to avoid probate and the courts. It’s as simple as filing a grant deed with the recorder’s office. Is it a pain to drive downtown after you sign the paper in front of a notary?
Yes. (For the record, if I prepare your trust for you, I take the deeds downtown for you.)
But, it is far worse for your heirs to drive downtown to file for probate, which is expensive and takes months (sometimes years) on end. Probate can cost thousands, even tens of thousands of dollars. Yikes. Even if they are granted a shortened probate process with a Heggstad petition, that is still time and money spent with the courts.
Do yourself and your heirs a favor: look through your trust documents and make sure your assets are in the trust. If someone says, “Don’t worry about putting those in the trust. The will catches it all.” Run. Run away and go straight to the recorder’s office with a notarized grant deed in hand.
Fund that trust.
** Estate of Heggstad, 16 Ca4th 943, 20 CR2d 433 (1993)
***Ukkestad v RBS Asset Finance, 235 Cal.App.4th 156 (2015)