Recourse for Your Loved Ones ...

By Tyler P Krueger, Associate Attorney

If You Fail to Transfer Property to Your Trust Before Your Death

A revocable trust—also called a “living trust”—is a legal tool that is frequently used as part of an estate plan. There are many benefits to using a trust, including the ability to transfer your property where you want after your death. The great thing about a revocable trust is that you can modify it any time during your lifetime. To ensure that your loved ones are spared any legal hassles, it’s important to do things right. 

Following the Right Process While You’re Alive

When you set up a revocable trust,[1] you nominate a trustee to manage your assets while you’re alive and after your death. Some people think that once you sign the trust document, you’re done, and everything you own automatically goes into your trust. But that’s not the case. There’s more work that needs to be done so that the trust can be properly administered after you die

When you establish a revocable trust, the trust needs to be funded. This can be somewhat confusing, as it sounds as if it has something to do with money. In actual fact, it means that you need to change how your property is titled so that a specific asset is in the name of your trust. For example, you would need to change a bank account from Joe Smith to Joe Smith, Trustee of the Joe Smith Revocable Trust

By doing this, your property can be easily transferred to the right parties, with minimal complications after your passing. It’s a big step toward “putting your affairs in order” and well worth the effort.

The Consequences: When Property Is Still in the Decedent’s Name

One of the many benefits of having a revocable trust is that you have the flexibility to add or remove property from your trust at any time while you are alive and in good health. But what happens when you pass away and there’s property outside of your trust? In other words, title to some property has not been changed.

Complications arise. After your death, it becomes much more difficult for your trustee to add properties to your revocable trust so that they are distributed in accordance with your wishes. 

1. Small Estate Affidavit: If the value of an asset that was left outside of your revocable trust is less than $166,250,[2] a small estate affidavit might help. This document allows your representative to add the asset to the trust. The small estate affidavit is most commonly used for bank accounts and investment accounts, but it can also be used for other types of assets.
   
   
2. Petition to Confirm Trust Assets: If the gross value of the property that was left outside of the revocable trust is greater than $166,250, a petition to confirm trust assets—commonly referred to as a Heggstad Petition—needs to be filed with the Probate Court. A Heggstad Petition typically states that it was  the decedent’s intent to transfer the property into the name of their trust, but they did not take any formal steps to change title when they were still alive. Your trustee needs to submit a Heggstad Petition to the Probate Court and request court authority to access and take control of the asset.[3]
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3. Probate: If a small estate affidavit or a Heggstad Petition are not viable options, then your trustee may need to initiate a probate proceeding. Probate is where your trustee petitions the court for authority to administer your estate with court supervision. By going through probate, they can gain control over assets that were not in the name of your trust. The downside of opening a probate is that the process is long and drawn out. It can also be costly, depending on the assets involved. Typically, Probate should  be a last resort for your trustee.

Check with Your Attorney About Other Options

​These are some of the most common options available to a trustee if an asset is not in the name of a decedent’s trust. There might be additional options available, depending on the specific facts and circumstances of a case. Each option has its advantages and disadvantages. It’s best for your trustee to consult with an attorney before deciding which one is best. 

Administering a loved one’s trust is never easy. And it can become even more difficult if valuable assets are not properly transferred into  a trust. The best way to have your trustee avoid the headache and expense of going through these additional steps and ease their mind is to double check that all your valuable assets are titled in the name of your revocable trust. 

Reach Out to Us for Assistance Regarding Post-Death Transfers to Your Trust

If you have any questions about post-death property transfers into a trust, the attorneys at Rusconi, Foster & Thomas have extensive experience addressing these issues and can advise you on your options. Contact us today, or give us a call at 408-779-2106.

Footnotes:

[1] This article is specifically limited to discussing options available to transfer a decedent’s assets into their revocable trust after they pass away. 
​[2] Probate Code § 13100. Please note that this number is adjusted annually and will not likely remain the same in subsequent years. This is the determined gross value as of 2021.
[3] Every Heggstad Petition is different depending on the facts. If all the beneficiaries of the revocable trust agree, a Heggstad Petition can be expedited and may not require a court appearance. If a beneficiary does not agree, or if a beneficiary is going to object to the Heggstad Petition, the process can take much longer and will require appearing before the court at a future date.