Importance of Listing Trust Assets

Listing the assets that are meant to be in your trust in an attachment to that trust is important for multiple reasons.

First, the attachment serves as a guide for the successor trustee for finding all of the trust assets. Without the attachment your successor could fail to find and distribute all assets of your trust to your beneficiaries in a timely manner. In the worst-case scenario, the successor never discovers the property until it is sent to the California Unclaimed Property Division.

Second, the attachment also shows it was the trustor’s intent of what property was meant to be in the trust. This is important if the property was not actually put into the trust. This attachment can, and should, be updated when other assets are purchased and the assets are intended to be in the trust.

The best practice is to transfer real estate, as well as financial assets, to your trust. (Retirement accounts and deferred taxation accounts which pass by beneficiary designation are an exception. These assets do not get transferred to the trust and require special analysis and discussion.) However, sometimes assets are not actually transferred to the trust, or real estate are taken out of the trust during a refinance, due to company policy, and after the refinance is complete the real estate is not put back into the trust.

Additionally, if you change banks or brokerage firms the accounts can be opened in your name instead of the name of the trust. Thus, it is important that all assets which are meant to be in the trust be listed on an attachment to the trust and that the attachment is periodically updated.

Having the assets listed on an attachment to the trust gives the successor trustee the opportunity to file a “Heggstad” petition. In the case Estate of Heggstad, the deceased person had transferred some of their real estate to their trust by deed, but they had not done so for all real estate they owned.

However, they had listed all of their real estate in an attachment to their trust. Therefore, according to the California Supreme Court, all of the real estate was owned by the trust because it is sufficient that the trust stated that the property set forth in the attachment was owned by the trust.

A “Heggstad” petition is a relatively simple petition which only requires one hearing. The Petition is filed with the Court and a hearing date is given. At that hearing, assuming all of the requirements are met, the Court will order that the assets that are on an attachment are part of the trust. This process is much cheaper and quicker than a full probate proceeding which would be required without the attachment.

If any property is not in the trust and not listed in the trust document or an attachment, then a full probate petition is likely necessary. A probate proceeding will take 6 months at a minimum, but likely it will take longer than a year. Additionally, Attorney’s and Administrator’s statutory fees will need to be paid, which will be much higher than fees for a Heggstad Petition as well as being exponentially more expensive than having actually transferred the assets to the trust.

These fees are paid from the assets that should have been in the trust and thus reduce the distribution to the beneficiaries. After the probate, then the administration of the Trust can finally begin.