You signed your trust, listed all of your assets on the trust ‘Schedule A’, but for some reason were unable to fund the trust or a title change effort failed, how can the ‘Schedule A’ save the day?
Although not a substitute for proper funding, the Schedule A may be your safety net. An attorney may petition the Court asking that an item on Schedule A or even all the assets on that Schedule be ordered into the trust without a lengthy probate process. This is called a Heggstad petition named for the first person trying this technique and is now rather standard. It is not free to fund the trust this way, but is far less expensive and time consuming than a probate.
Why would a Heggstad be necessary?
- Suppose you sign your trust shortly before a vacation with plans to fund it on your return, but you pass away on your trip.
- Perhaps you instructed your broker to change title on your account, but one of the assets listed on the statement required additional steps that were not taken.
- Another very common circumstance is refinancing real property, your home or rental property. The mortgage company required you to take the property out of your trust, or perhaps the escrow company did this, but upon completion of the refinance they did not return the property to the trust nor remind you to do so.
Given the importance of this safety net, it is a good idea to update your Schedule A periodically. A good time to update your Schedule A is when you have changed accounts, purchased new assets or every year or so at tax time.