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NEWSLETTERS
Lower Cost Alternative to Probate
by Jacqueline Skay
I was recently retained by a lady whose father's Trust named her as the successor Trustee and sole beneficiary. Before he died her father had transferred all assets into the Trust except one bank account. That bank account was in his name alone and held a few dollars more than $166,250. The bank informed my client she would need to open a probate in order to transfer the bank account to herself. If that turns out to be true, the probate costs and fees will be over $5,000, not counting Executor's fees because my client is the sole beneficiary and will act as Executor if probate is necessary. If a third party had to act as Executor, the fees would be double.
Fortunately, we may have another option. If we succeed, this option will cost about half what the probate fees would have been. When the father signed his Trust he also signed a General Assignment and Conveyance which stated the father's intent to transfer all of his assets, including all financial accounts, into his Trust. Before submitting to a full Probate, we are petitioning the court on what is commonly referred to as a Heggstad Petition. In this Petition we argue to the court that it was the Decedent's intent to transfer the bank account into the trust and that no purpose will be served by a probate because Decedent had a Will which left all his property to his Trust.
In considering a Heggstad Petition, the court typically tries to determine whether or not the Decedent intended the asset in question to be owned by the Trust. Evidence of the Decedent's intent includes listing the asset on a separate Schedule of Assets attached to and referenced in the trust instrument.
I am often told by new clients that their previous attorneys told them not to put their bank accounts in the Trust. If the father of my client had put his bank account into his Trust, the trust administration would already be complete and we would not be waiting six weeks for a court date and hoping the court will accept our Petition. And, my client would not have to spend any money on court proceedings.
I do not state unequivocally that all bank accounts should always be titled in the name of the trust. However, there are few situations in which putting a bank account into the trust would be a mistake. There are considerably more situations in which leaving a bank account out of a trust will cost the beneficiaries significant money and time. In the case above, we would have a better chance of succeeding on our Heggstad Petition if the drafting attorney or the deceased father had prepared a Schedule of Trust Assets. This schedule is merely a list of all assets the client intends to be owned by the Trust. It provides an additional piece of evidence of the Decedent's intent that a particular asset be owned by the trust and not be probated.
I encourage you to maintain your Trust funding in order to avoid Probate and to annually review your Trust and double check your asset list and bring it up to date. Cross off the list any accounts that have been closed and write in any new ones. Prepare a new Schedule when the first Schedule gets too messy with "cross-offs" and "write-ins".
With very few exceptions, your assets should be titled in your name as Trustee. Your retirement assets, annuities and life insurance should name your trust as either contingent or primary beneficiary, depending on your individual circumstances. Your residence and other real property should be owned by you, as Trustee of your Trust. If you refinance, make sure at the conclusion of the loan process a quit claim deed is prepared and recorded transferring the real property back into the trust. If you follow these simple rules, your heirs should avoid the time and expense of Probate court altogether. Even if an asset is inadvertently left out of the trust, if you have properly assigned your assets to your Trust AND kept your Schedule of Assets up to date, the Heggstad Petition will provide a lower cost alternative to a formal Probate proceeding.
And, if you are Trustee of a Trust and you are told a Probate is necessary to transfer assets to the Trust, double check with an attorney Certified by the State Bar as a Specialist in Estate Planning, Trust and Probate. There may be a lower cost way to accomplish the transfer.
by Jacqueline Skay
I was recently retained by a lady whose father's Trust named her as the successor Trustee and sole beneficiary. Before he died her father had transferred all assets into the Trust except one bank account. That bank account was in his name alone and held a few dollars more than $166,250. The bank informed my client she would need to open a probate in order to transfer the bank account to herself. If that turns out to be true, the probate costs and fees will be over $5,000, not counting Executor's fees because my client is the sole beneficiary and will act as Executor if probate is necessary. If a third party had to act as Executor, the fees would be double.
Fortunately, we may have another option. If we succeed, this option will cost about half what the probate fees would have been. When the father signed his Trust he also signed a General Assignment and Conveyance which stated the father's intent to transfer all of his assets, including all financial accounts, into his Trust. Before submitting to a full Probate, we are petitioning the court on what is commonly referred to as a Heggstad Petition. In this Petition we argue to the court that it was the Decedent's intent to transfer the bank account into the trust and that no purpose will be served by a probate because Decedent had a Will which left all his property to his Trust.
In considering a Heggstad Petition, the court typically tries to determine whether or not the Decedent intended the asset in question to be owned by the Trust. Evidence of the Decedent's intent includes listing the asset on a separate Schedule of Assets attached to and referenced in the trust instrument.
I am often told by new clients that their previous attorneys told them not to put their bank accounts in the Trust. If the father of my client had put his bank account into his Trust, the trust administration would already be complete and we would not be waiting six weeks for a court date and hoping the court will accept our Petition. And, my client would not have to spend any money on court proceedings.
I do not state unequivocally that all bank accounts should always be titled in the name of the trust. However, there are few situations in which putting a bank account into the trust would be a mistake. There are considerably more situations in which leaving a bank account out of a trust will cost the beneficiaries significant money and time. In the case above, we would have a better chance of succeeding on our Heggstad Petition if the drafting attorney or the deceased father had prepared a Schedule of Trust Assets. This schedule is merely a list of all assets the client intends to be owned by the Trust. It provides an additional piece of evidence of the Decedent's intent that a particular asset be owned by the trust and not be probated.
I encourage you to maintain your Trust funding in order to avoid Probate and to annually review your Trust and double check your asset list and bring it up to date. Cross off the list any accounts that have been closed and write in any new ones. Prepare a new Schedule when the first Schedule gets too messy with "cross-offs" and "write-ins".
With very few exceptions, your assets should be titled in your name as Trustee. Your retirement assets, annuities and life insurance should name your trust as either contingent or primary beneficiary, depending on your individual circumstances. Your residence and other real property should be owned by you, as Trustee of your Trust. If you refinance, make sure at the conclusion of the loan process a quit claim deed is prepared and recorded transferring the real property back into the trust. If you follow these simple rules, your heirs should avoid the time and expense of Probate court altogether. Even if an asset is inadvertently left out of the trust, if you have properly assigned your assets to your Trust AND kept your Schedule of Assets up to date, the Heggstad Petition will provide a lower cost alternative to a formal Probate proceeding.
And, if you are Trustee of a Trust and you are told a Probate is necessary to transfer assets to the Trust, double check with an attorney Certified by the State Bar as a Specialist in Estate Planning, Trust and Probate. There may be a lower cost way to accomplish the transfer.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
Copyright 2023 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.
Copyright 2023 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.