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How to determine probate asset vs trust asset

San Diego, CA |

In its simplest form, what determines whether a property asset is a probate asset or a trust asset? I understand that an argument can always be made for either case. In my particular example, my father had a lot that he purchased in the name of his trust, he built a home on it, years later he removed the property from the trust, possibly to refinance it, and so took title in his own name. He never put it back into the trust and it stayed that way until he passed away about 1.5 years later. So, my question isn't whether it should be one or the other. My question is WHAT IS IT at this moment.

Attorney Answers 4

Posted

An argument cannot always be made for either case. These are typically VERY clear cut. If a trustee holds title to the property then it is trust property. Anything your father owned that was not in trust, and that did not have a death beneficiary is a probate asset. You will certainly need to consult a local estate and probate attorney as it is very important that you do not commingle the two types or assets and that you are sure you have properly probated the estate.

None of the above information is intended to constitute legal advice; rather it is intended to give the consumer sufficient information to determine whether or not they should consult an attorney regarding their legal matter.

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Asker

Posted

Thanks Alfred. Is it your opinion then (without knowing more) that it is a probate asset if it's in his real name and not in the name of his trust?

Posted

I agree with Mr. Fargione that you should speak to a lawyer. Did you father reside in California and is the real property in California? Are you the trustee?

There is case law if California that would allow you to petition the Court for a determination that the property was actually an asset of the Trust. This would avoid a probate, but if a probate is already necessary for other assets, you want to consider whether it is better to just probate the property.

Success in this kind of petition can vary by the county in which the Petition is brought - normally where the principal place of administration of the trust is being conducted. I practice in the San Francisco Bay Area and it is far easier to get petitions through in some counties rather than others so advise from a local trust attorney is recommended. It can be fact specific. An attorney can help you with investigation of the facts. There are facts that can be useful in getting a petition approved, but because the facts may have more weight in some counties, I will leave it to local counsel to address the issues and to advise you of your chances of success.

Under any circumstances, you will need a court order of some type (either a probate order or an order declaring that the property is an asset of the trust) in order to transfer it. This is NOT something that you want to attempt without the assistance of an attorney.

DISCLAIMER: THE INFORMATION PRESENTED HERE IS GENERAL IN NATURE. IT IS NOT INTENDED, NOR SHOULD IT BE CONSTRUED, AS LEGAL ADVICE. THIS RESPONSE DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN US. YOU SHOULD CONSULT WITH A QUALIFIED ATTORNEY FOR SPECIFIC LEGAL ADVICE ABOUT YOUR PARTICULAR SITUATION.

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Asker

Posted

Hi Mary, Yes, my father resided in California and the property is in California. Our hope is that it that it would be considered a probate asset; just by looking at it at face value.

Mary Lynn Symons

Mary Lynn Symons

Posted

If it is a trust asset then it would pass without probate to the trust beneficiaries. Usually, there would be a pour-over will that would direct the distribution to the trust. As I said, if you are the Trustee (or if you are the Executor under your father's Will), you should speak to an attorney. If your father did not have a Will, then the situation might be a little more complicated depending on other facts (and how San Diego views these petitions), so you should still speak with an attorney in San Diego.

Posted

As Attorneys Symons and Fargione have advised you, your situation with your father's trust is very fact dependent. Fortunately, however, it is not uncommon for a trustor (such as your father) to have real property that was titled in the name of the trust but for some reason was subsequently retitled back into the individual's name. Refinancing one's property is the most common reason for this situation to occur.

As the attorneys have also advised you, a petition in the Probate Court can be filed to address this problem. These types of petitions are known as Heggstad petitions and are based on Probate Code Sec. 850. In San Diego County, these petitions are not unusual and, if properly pled and have sufficient facts to substantiate the trustor's intent, are often successful. In your case, this proof could be the fact that your father had originally titled the property into the trust or even trust language that indicates that your father intended that all his real and personal property be titled into and be an asset of the trust.

I also agree that you should consult with a trust and Probate attorney about this process.

Disclaimer: The above answer does not create an attorney/client relationship. My responses are intended to provide general information about the question posted. I am licensed to practice in the state of California. The information provided on this site should not be used as a substitute for conferring with or hiring a competent legal advice from a licensed attorney that practices in the subject area in your state.

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Posted

I agree with the previous three attorneys. Here is what I would add. Look at the Trust language.
Often there will be a general assignment of real and personal property to the Trust. For example,

"FOR NO CONSIDERATION, WE HEREBY GRANT, TRANSFER, ASSIGN, CONVEY AND DELIVER to the Trustees of THE ____________________ FAMILY TRUST,
all of our right, title and interest in and to all real and personal property that we own now or acquire later during our lifetimes,
including all items set forth hereafter, and all cash, bank accounts, stocks and bonds, general and limited partnership interests,
promissory notes and trust deeds payable to us (or our interest in any such property), together with any insurance on such property."

This might show the Probate Court that your father intended the real estate to go back into the Trust after the loan refi.
However, you'll need a little more than that to convince the judge. Usually, in a Heggstad Petition, the specific property will need to be
described in the Trust. The property address and Assessor's Parcel Number might be enough, but it's better if you also have the legal description.

Even if you have all the right wording in the Trust, a Heggstad Petition is like litigation and can be quite costly and time-consuming. And there are no
guarantees of success. I like the attorney who advised, if you need to probate some of the other assets in dad's estate,
then just include the commercial lot too. Bottom line ... this is a complicated matter, and you will need to get the help of an attorney in your area.

Randall B. Klotz, Esq.

DISCLAIMER: This answer gives partial details for discussion purposes only. It is not intended to be a complete analysis of your legal issue, nor does it create an attorney-client relationship. If you have any questions, you should seek the advice of an attorney in your city or local area.

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