Catanese & Wells, A Law Corporation provides a quarterly newsletter to the California probate and trust professional community including lawyers, accountants, professional fiduciaries and insurance providers. www.cataneselaw.com.
This issue of the Probate and Trust Legal Summary focuses on the probate court’s jurisdiction to include property as part of an estate or trust notwithstanding the property was not properly transferred to the estate or trust during the decedent’s lifetime.
Generally, personal property and real property of a person should be assigned or transferred by the person to their trust or by means of a will prior to death. The risk of failing to do so involves the necessity of court intervention via a probate proceeding or in contested litigation a risk that the property does not go to beneficiaries as intended by the decedent. Moreover, the cost of court proceedings to correct or to confirm the intentions of the decedent can be costly. Recent, appellate decisions appear to confirm the appellate courts are ready to enforce the apparent intentions of a decedent even in cases where legal formalities were not observed.
One of the earliest cases to allow for the transfer of real estate to a trust notwithstanding the decedent failed to do so is the case of Heggstad. In this case the court permitted real estate to become part of a trust notwithstanding the trustor had failed to transfer the real estate to the trust prior to death. The appellate court agreed that the real estate should become part of the trust since in equity it was the proper decision given the underlying facts and circumstances all of which confirmed it was the testator’s wishes and intent to transfer the real estate to the trust (i.e., the real estate was specifically identified in trust documents with the intentions of the decedent confirming that the specific real estate was to be transferred to the trust). See Estate of Heggstad (1993) 16 Cal. App.4th 943, 951-952.
The appellate decisions were devoid of specific instruction on how to handle personal property which was not transferred during the lifetime of a decedent to a trust or estate. The case of Kucker v. Kucker (2011) 192 Cal. App.4th 90, 95-96 decided that personal property (shares of stock) could be transferred after death of the testator to the trust so long as the facts and circumstances supported an equitable finding by the court to do so. The appellate court found that a general assignment was sufficient for personal property to be transferred to a trust notwithstanding that the personal property was not specifically identified in the general assignment. The court relied on the inherent power of the probate court to decide all incidental issues necessary to carry out the express powers of supervision over the administration of a trust.
In March of 2015 the Fourth Appellate District of the Court of Appeal in California issued its opinion in Ukkestad v. RBS Asset Finance, Inc. (2015) 235 Cal. App.4th 156, 160-161. The appellate court further stretched the ability of a probate court to include real property as part of trust assets even when the underlying documentation was vague or non-existent. Specifically, the case involved two real estate parcels which were not particularly described in any assignment to the trust. However, the trust provided that the decedent intended to assign ownership of all of his real property to the trust. The underlying probate court denied a petition by the trustees following the decedent’s death to have the real property added to the trust on the grounds that the trust did not satisfy the statute of frauds regarding the two real property parcels. In reversing the probate court, the appellate court found that a general statement in the trust document that the decedent intended to convey “all of his real and personal property” to the trust was a sufficient declaration to comply with the statute of frauds. (And, the appellate court also stated that the facts permitted reference to extrinsic evidence to meet the requirements for the property to be added to the trust.)
As noted above, the trend of the appellate court decisions in California is to allow real property and personal property to become part of a trust if there is sufficient evidence confirming the intent of the trustor and there is sufficient evidence to confirm the property is owned by the trustor outside of the trust. It appears the appellate courts will now permit property outside of trust to be brought within the trust given the inherent equitable powers of the probate court where to do so is consistent with the express intentions of the testator.
For further guidance regarding the above, the reader is encouraged to contact the legal offices of Catanese & Wells, A Law Corporation at www.cataneselaw.com or by telephone at (818)707-0407.