A Common Mistake With Trusts

Make sure to finish the process after your trust is set up

When setting up a trust, ALL assets that are owned by an individual must be titled in the name of the trust. It is not unusual, however, for people to be forgetful or neglectful in actually placing their assets into the trust.

The most common example is when the property is refinanced. In certain cases a mortgage lender may not want the borrower to be a trust, so the buyer will put the property back into their name to refinance intending to deed the property back to the trust later. Then they forget to do so.

This lack of follow through can cause problems later on. When the creator of the trust passes on and it becomes the successor trustee’s responsibility to manage, dispose of the assets and distribute the proceeds, there can be complications if there is property outside of the trust. The successor trustee typically has a probate to deal with due to the oversight.

There is hope for those in this type of circumstance due to a ruling in California. The case played out as follows:

Larry Gene Mabee died on December 16, 2012 – he had a Trust and a pour over will. Mabee owned two parcels of land that were held by Mabee as an individual. The trust instrument did not describe the two parcels by reference to any specific identifying information unique to those properties. Although not specifically identifying the two parcels, the trust instrument GENERALLY STATES that Mabee ASSIGNS the ownership of all his real property to the Trust effective immediately.

When Mabee passed away his Successor Trustee, Daniel Ukkestad, “filed a petition for an order confirming that the two parcels are part of the Trust’s assets, premised on… Language from the Trust Instrument.”

The Appellate Court noted that the Supreme Court 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…”

So, in the Mabee case the Appellate Court said, “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.”

This is a very positive step in helping trusts stay out of probates. However, it is still important to be diligent and ensure that all property is deeded to the trust properly.

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