Revocable Living Trusts are popular in California and a way that lots of people hold title to their real estate and other assets.
However, some people forget or neglect to transfer their assets into that trust.
Example is that a mortgage lender might not want the borrower to be a trust, so the buyer acquires the property as an individual or couple, intending to deed the property to the trust later. Then the buyer forgets. This can happen with a refinance when it is taken out of the trust and the owner forgets to put it back in the trust.
This can result in later problems. The original creators of the trust pass on, and it is up to the successor trustee to dispose of the assets and distribute the proceeds (or whatever is specified in the will). But the successor trustee can’t sell the house (or boat, or car) because it was not put into the trust.
A recent ruling by California’s Fourth Appellate District Court of Appeal (Ukkestad v. RBS Asset Finance, March 16, 2015) has some positive news for those (or for the heirs of those) who forget to place assets in their trust.
Facts of the case: “Larry Gene Mabee, who died on December 16, 2012 executed a First Amendment and Complete Restatement of the Trust on December 7, 2012 (the Trust Instrument), appointing himself as the trustee. On that same date, Mabee also executed a will, which contains a pour-over provision giving the residue of the estate to the trustees of the Trust.
Mabee owned two parcels of real estate that are the subject of this appeal: (1) a parcel at 1025 East Bobier Drive, in Vista, California; and (2) a parcel known as 80501 Avenue 48, Space 114, in Indio, California (collectively, the Two Parcels). According to the grant deeds, title to the Two Parcels was held by Mabee as an individual.
The Trust Instrument does not describe the Two Parcels by reference to any specific identifying information unique to those properties, such as the address or legal description of the Two Parcels. Although not specifically identifying the Two Parcels, the Trust Instrument generally states that Mabee assigns the ownership of all of his real property to the trustees of the Trust effective immediately.”
Subsequent to Mabee’s death, successor trustee, Daniel Ukkestad, started to follow a procedure that, for many years, has been in place in California for situations when a decedent’s property had been intended to be in a trust, but had not been properly titled.
Ukkestad “filed a petition under Probate Code Section 850, subdivision (a)(3) for an order confirming that the Two Parcels are part of the Trust’s assets, premised on … language from the Trust Instrument.” That language said in part, “The Grantor, by the execution of this instrument, hereby assigns, grants, and conveys to the Trustees of this instrument all of the Grantor’s right, title and interest in and to all of his real and personal property…”
The probate court was provided with deeds showing that Mabee was the owner of the Two Parcels.
The Probate Court denied the petition for an order confirming that the Two Parcels were trust assets. The Trust had a declaration, but that declaration did not specifically refer to the Two Parcels. Without a specific description, the Probate Court held that they could not be confirmed as assets of the Trust.
But the Appellate Court reversed the decision of the Probate Court and noted that “our Supreme Court (in California) recently endorsed a ‘flexible, pragmatic view,’ under which uncertain written contractual terms comply [with the requirement of certainty of meaning] as long as they can be made certain by reference to extrinsic evidence…” As an earlier case had put it, “the governing principle is: ‘That is certain which can be made certain.'” – and that “the Trust Instrument contains language that identifies which of Mabee’s real property is being conveyed to the trust. Specifically, in the Trust Instrument, Mabee refers to ‘all of his real and personal property, including … real property …, wherever situated.” From there they went on to observe, “it is a simple matter of referring to publicly available records to determine Mabee’s real estate holdings.”
Lesson Learned: Specifically identifying property in the trust (or in an attachment) and correctly placing it in the trust is still the best practice.
However, the Ukkestad case also informs that if we don’t do everything right, there’s still a chance of a good outcome. See California’s Court of Appeal decision in (Ukkestad v. RBS Asset Finance, March 16, 2015- click here).
By Harrison K. Long. Source of some information for this is an article by Bob Hunt, August 3, 2015, about “What happens to property when it is not deeded into a trust”.
This article is for information only and is not the providing of legal services. If you have such a situation where a trustee or trust administrator did not put a property in the trust as was intended by the trustor, you should contact an experienced real estate and/or estate planning attorney.