Court Approves Easy Probate Avoidance

A California Court of Appeals recent ruling may provide a way to fund a revocable trust that could provide for easy probate avoidance. Although this case applies specifically to California law, it does also give a template for other states to apply a similar probate avoidance technique for the revocable trusts under their law. By using broad conveyance language in a trust instrument to avoid probate on the trust settlor’s assets, this process can work even if trust funding process was not set up perfectly.

Facts of the Case

In the case of Ukkestad v. RBS Asset Finance, Inc., Larry Mabee executed a trust in December 2012 and died about two weeks later. He had appointed himself as trustee and also enacted a will that which contains a pour-over provision that gave the residue of the estate to the trustees of the trust. At the time of his death, Mr. Mabee owned two parcels of real estate that were titled in his own name.

The trust specifically stated that “all of his real and personal property” was to go into the trust. After his death, one of the successor trustees filed a petition in probate court for an order confirming that the two parcels of land, which were never explicitly added to the trust, were in fact assets of the revocable trust. The petition was opposed by RBS Asset Finance, a potential creditor to Mr. Mabee’s estate. The company wanted the two parcels of land as part of the estate as guarantee of a prior transaction.

The probate court denied the petition of Mr. Mabee’s trustee, and he appealed. RBS declined to oppose the appeal, but the Court of Appeals found that its exit did not moot the question at hand. Therefore, the court ruled on the issue on tax consequences and probate for future estates.

Ruling of the Court

The California Court of Appeals held that real estate can be made part of a revocable trust even if the trust was not executed perfectly so long as certain requirements are met. First, the owner of the real estate must also be the settlor of the trust and naming himself as trustee. Second, the transfer must meet the statute of frauds. In order to do so, the conveyance must be in writing and be identified with reasonable certainty.

The Court of Appeals also addressed whether the broad language of the conveyance in the trust document adequately described the real estate for the purposes of Mr. Mabee’s revocable trust. Under California law, like other state law, extrinsic evidence may be used in determining whether the description of the real estate is adequate. The judges held that the description fulfills the reasonable certainty test if the evidence provides the means or key for identifying the real estate. In Mr. Mabee’s case, his language in his trust document applied to all of his real estate, which would include the two parcels in question.

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