February 3, 2011

Heggstad Petition - Kucker v. Kucker

One of the required elements of a California revocable trust is that the trust be funded with some piece of property, whether real or personal. Prob C §15202. 

Often times, a person who creates a trust without the assistance of counsel will fail to formally transfer their assets into the trust because they are either unaware of the requirement or are unsure as to how to effect the transfer from themselves as an individual to themselves as trustee of their trust. 

A famous California probate case was the result of the failure to formally fund a trust. In Estate of Heggstad (1993) 16 CA4th 943, the trust drafter failed to formally transfer his home into his revocable trust but his revocable trust included a declaration of trust in which it listed his home as an asset of the trust. The Heggstad opinion said that this declaration of trust was sufficient to transfer his home into the trust even though he never formally transferred his home through a deed into the trust. Consequently, many California attorneys now file Heggstad petitions on behalf of their clients to formally transfer an asset, namely a house, into the decedent’s trust so as to avoid probate. Prob C §850.

Recently a California appellate court decision has expanded the reach of Heggstad petitions to include personal property, namely shares in a public held company. Kucker v. Kucker

In Kucker, the mother owned the shares of numerous companies and created a trust which was funded by a general assignment in which she assigned all of her interest in said shares to her trust. However, the mother failed to specifically name one of the companies she owned shares in, Medco. Consequently, the beneficiaries petitioned the local probate court to confirm that the shares of Medco were a trust asset so as to avoid probate. While the trial court ruled that the Medco shares were not trust assets, this decision was reversed by the appellate court. 

It found that “there is no California authority invalidating a transfer of shares of stock to a trust because a general assignment of personal property did not identify the shares.” Kucker v. Kucker. Thus, the appellate court ruled that the shares of Medco was a trust asset and no probate was needed even though the value of the asset was greater than $100,000. 

Heggstad and Kucker illustrate the importance of properly funding a revocable trust because the failure to do so can result in a significant time delay in distributing a person’s estate and in large attorney fees. For example in Kucker, the decedent passed away in November 2009 yet the decision by the appellate court was not rendered until January 2011. 

Furthermore, it is likely that the participants in Kucker had to spend at least $5,000 in attorney fees to litigate their issue first at the trial court level and then at the appellate court level. Similarly in Heggstad, the decedent passed away on October 20, 1990 but litigation did not conclude until June 21, 1993, when the appellate court rendered their decision. Moreover, the cost to file the original petition and then appeal the trial court’s decision most likely cost the beneficiaries thousands of dollars in attorney fees.

In case you are wondering about the colored picture of California on the right, the Kucker decision was reached by the Second Appellate District which is shaded green, while the Heggstad decision was reached by the First Appellate District which is shaded blue.