In its simplest form, a Trust is merely the holding of money by a person for the benefit of someone else. When a friend hands you his wallet until he gets back, a Trust is formed.
Trusts cannot be formed without property transferring from the hands of the owner to the hands of the Trustee. We call this Trust funding. If there is no property transferred to the Trustee, then there is no Trust.
But what exactly does it take to “fund” a Trust. It can be surprisingly simple…at times.
That brings us to Estate of Heggstad. In Heggstad, an owner of real property created a Trust and stated in that Trust that he was now intending to hold the property as Trustee of the Trust. But the owner never took the step of preparing and recording a new deed transferring title from his individual name to his name as Trustee of his newly-created Trust.
The Appellate Court found in Heggstad that the written statement where the owner declared himself the holder of the real property as Trustee was sufficient to have created a Trust over the real property identified in the Trust document. And hence was born the Heggstad Petition. Anytime a Trust is created, but not properly funded, a beneficiary can bring a petition asking the court to find that the real property is an asset of the Trust.
But, until recently, Heggstad only dealt with real property. There was no case law that allowed the same technique to be used for any other type of property. And then along can Ukstadt (what’s with these interesting names?).
Under Ukstadt, the Court extended the Heggstad idea to personal property as well. The key is to have a declaration of intent that clearly shows the property was meant to be held by the person who previously owned it as Trustee of a Trust.
Many of these claims are brought under Probate Code section 850, but even that code section still requires a legal cause of action for seeking the transfer of property. Cases like Heggstad, and now Ukstadt, provide parties with that legal authority.
Whatever the property you have, there may be a way to transfer that property into a Trust without having to go the probate route.