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Recent developments in Probate, Estate and Tax Law.
  • Henry J. Moravec III

What happens when real property is only listed on a Schedule to a Trust and no Deed is signed? After


A recent California Court of Appeal decision, Carne v. Worthington (4/13/16), shows how disputes over trusts can happen if one is not careful in executing and recording property deeds to transfer property into a trust. Had the decedent merely recorded the proper deed his estate could have saved years of litigation time and tens of thousands in litigation costs. This case involved a dispute over the ownership of real property located on Via Regla formerly owned by decedent Kenneth Liebler. Kenneth, who passed away in October 2012, had executed a revocable trust in 1985 and the Via Regla property was transferred to the 1985 Trust. Kenneth then executed a second trust, an irrevocable trust in 2009 (the “2009 Trust”), which stated, “I transfer to my Trustee the property listed in Schedule A, attached to this agreement.” The sole asset listed on Schedule A was the Via Regla property. However, Kenneth did not transfer title to the Via Regla property by a deed from the 1985 Trust to the 2009 Trust. This was an apparent costly oversight. After Kenneth passed away, his daughter Melanie Carne filed a petition to confirm the validity of the 2009 Irrevocable Trust. A grandson, Dillon Hasting, opposed the petition and argued that the 2009 Trust was not valid because Kenneth had not properly transferred title to the Via Regla property and that property was the only asset in the trust. The trial court ruled in favor of the grandson Hasting which meant the Via Regla property would not be left to the daughter. Daughter Melanie filed an appeal. The Court of Appeal reversed the trial court and ruled in favor of Melanie. The appellate court held that the language in the 2009 Trust was sufficient to convey the property to the 2009 Trust and Kenneth was not required to execute a deed.

The appellate court reasoned that while Kenneth did not own the property individually at the time of the transfer, his signature on the 2009 Trust was sufficient to convey title from the 1985 Trust to the 2009 Trust because the 1985 Trust was a revocable inter vivos trust, he owned the property as sole trustee of the 1985 Trust, and he had the power to transfer real property owned by the 1985 Trust. This case is interesting because the law has been moving towards confirming property listed on a Schedule A as trust property ever since the famous Heggstad case. It has now become well settled law that if title to a piece of real property is in the name of a person, a Schedule A to a trust or a general assignment to the trust is sufficient to transfer title to the trust, even if the person never got around to actually executing a deed. This is because the Trust, Schedule A, and/or general assignment is evidence of the intent of the person. This was not always the case. For years the Courts simply held: no actual transfer = no transfer. Heggstad was a watershed ruling because many people intend to have all of their property in their revocable trust but either forget to transfer the property or most commonly transfer it out to refinance and simply forget to transfer it back after refinancing. Worthington moves the law a bit farther towards effectuating the intent of a person, rather than following the technical rules of how the property is held. However, had the rules been followed the parties would not have wasted 3 1/2 years in court and over $150,000 in attorneys' fees and costs. Remember to follow up on transferring your assets into your trust and use professionals so nothing falls through the cracks. Our office always insists on recording the trust transfer deeds so these type of oversights do not happen. As was seen in this case, a simple failure to record can have a significant financial impact on an estate.

#trustdisputes #trustadministration #californiaestateprobate #HenryJMoravecIII #Probateattorney #willsconflicts #estateplanning #willcontests #Probatemediation #probateofestate

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