Recently, our firm settled a case for a client where the client received his entire inheritance as part of the settlement. Our client came to us and said that his mom had passed away 6 months prior. However, when checking the county records, our client had seen that Stepdad had taken the house that Stepdad and Mom put in trust for our client and his siblings and had put it in Stepdad’s newly formed trust. Stepdad’s new, much younger wife, not our client and his siblings, was the beneficiary of Stepdad’s new trust.
Our client gave me a copy of the trust agreement between his mom and Stepdad. The trust had become irrevocable when our client’s mom passed away 6 months prior. Yet, unbeknownst to me, our client had talked to Stepdad’s lawyer. Our client understood that Stepdad’s lawyer had told our client that it was perfectly legal to take the property out of an irrevocable trust under California’s community property laws. Wait a minute. It isn’t okay to take property out of an irrevocable trust in California, regardless of community property laws. An irrevocable trust is just like it sounds, irrevocable. Irrevocable means property can’t be taken out of the trust. In fact, Pursuant to PROB § 859 where property was transferred from the Trust and/or the Estate of the decedent, the transferee shall be liable for twice the value of the property recovered by an action under this part.
A Heggstad petition filed under PROB § 850 Petition governs the “conveyance of transfer of property claimed to belong to decedent or other person.” The most common scenario is the scenario that our client and his siblings experienced: where the decedent owned a property, title the property to the trust, but after the trust became irrevocable, the trustee removed the property from the trust, although the settlors clearly intended the property to be a trust asset. The beneficiaries of a trust have standing to file the Heggstad petition in the probate division of a state court. Sometimes, as in our client’s case, the parties to the Heggstad petition come to a settlement.
Although under the trust, our client was only supposed to inherit after Stepdad had passed away. Under the settlement, our client received his full inheritance before the end of the court’s determination of the Heggstad petition. Then our client dismissed the Heggstad petition because the parties had come to a settlement. In my opinion, the settlement was the best outcome for our client!
