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Inside Out: What Happens When Property is Left Outside of a Trust?

When a Trust is created, the Trust creator (the “Grantor” or “Settlor”) needs to transfer all property into the name of the Trust. For example, if the grantor owns a house, the grantor must record a deed transferring legal ownership of the house into the Trust. What if the Trust is created but the property is left out?

There are two options. The first option is called a Heggstad Petition under Probate Code Section 850. Heggstad is the name of the California Trust case that set precedent for this type of situation. If you file a Heggstad Petition (or “850 Petition”) you ask the court to issue an order declaring the property is part of the Trust.

The Petitioner must convince the court that the Grantor intended the house to be in the Trust. There is a risk that the court might deny an 850 or Heggstad Petition if it doesn’t meet the “Heggstad standard.”

The second option is to simply probate the house. Usually, when a Trust is created, the Grantor also creates a Pour-Over Will, which is a Will that pours the decedent’s remaining assets into the Trust. Unfortunately, the assets will have to go through the probate process to be transferred into the Trust. The probate process takes time.

A Heggstad Petition is faster and simpler, but it is not guaranteed to work. The probate option is slower, but it is guaranteed to work. A lawyer with experience in the trust and estate field can advise you on whether your 850 Petition under the Heggstad case is likely to succeed.