Heggstad Petitions for Financial Assets

While real estate often steals the spotlight in unfunded trust discussions (due to high values and title issues), Heggstad petitions under California Probate Code § 850 are equally powerful for rescuing bank accounts, brokerage/investment portfolios, stocks, bonds, retirement accounts, and other financial assets that were never formally retitled in the trust's name. The core principle remains the same as in the landmark Estate of Heggstad (1993) 16 Cal. App. 4th 943: If there's clear and convincing evidence of the settlor's (decedent's) intent to include the asset in the trust, the court can confirm it as a trust asset without requiring full probate.

Key Takeaways

Heggstad petitions can be used for assets other than real property, like non-qualified financial assets
Courts always look to the decedent’s intent to determine whether an asset improperly titled is a proper asset of a trust

HEGGSTAD PETITIONS FOR NON-RETIREMENT ASSETS

Financial assets are frequently overlooked during trust funding because they feel "intangible" or are managed through institutions that don't always prompt retitling. Common scenarios include:

Bank or brokerage accounts opened or updated after trust creation but left in the decedent's individual name.
Investment portfolios, mutual funds, or securities listed generally on a trust's Schedule A or under a broad assignment clause, but never transferred via account change forms.
CDs, money market accounts, or IRAs/401(k)s where beneficiary designations might align with the trust, but title remains personal.
Newly acquired investments (e.g., stocks bought post-trust) not added to the trust schedule.

The good news: Courts routinely grant Heggstad relief for these assets when evidence is solid. Success often hinges on:

A Schedule A (or similar attachment) that lists the accounts broadly (e.g., "all bank and investment accounts" or specific institution names/numbers).
A general assignment clause in the trust declaring transfer of "all stocks, securities, and personal property" — courts have upheld these even without hyper-specific details when supported by account statements or tax records showing ownership.
Extrinsic evidence like the drafting attorney's declaration, trust funding instructions, or historical statements confirming the settlor treated the assets as trust property.

In practice, these petitions are often less contested than real estate cases because financial institutions cooperate readily once a court order is issued (they simply retitle the account per the order). Unopposed filings can resolve in weeks to a couple of months, avoiding probate's creditor claims, public disclosure, and statutory fees (which can hit 4–7% on larger estates).

Potential challenges include:

Vague or missing schedules leading to insufficient proof.
Contested claims if beneficiaries argue the accounts were intentionally left out.
Retirement accounts with tax implications requiring careful coordination.

Examples from Practice: In a 2024 Orange County case (anonymized), a successor trustee discovered multiple brokerage accounts worth over $500,000 that were listed generally under the trust's "all securities and investments" clause, but never retitled due to an oversight during a portfolio transfer. The court granted the Heggstad petition after reviewing the assignment language, account statements, and testamentary document language confirming intent, avoiding probate and allowing quick distribution. Similarly, trial-level approvals are common for bank CDs where a Schedule A referenced "all liquid assets," supported by tax records, but denials occur when no such evidence exists, forcing the assets into full probate administration.

HEGGSTAD PETITIONS AND RETIREMENT ASSETS

For qualified retirement accounts like IRAs, 401(k)s, or 403(b)s, additional planning is essential since they cannot be directly owned or titled in the trust's name during the owner's lifetime without triggering immediate taxable distributions, penalties, and loss of tax advantages under IRS rules. Instead, during the owner's lifetime, designate the trust (or a special sub-trust like a conduit or accumulation trust) as the primary beneficiary to avoid probate—ensuring post-death distributions flow according to trust terms for protection (e.g., against spendthrift beneficiaries or minors) while preserving required minimum distributions (RMDs) and stretch provisions.

Naming the trust as a backup (contingent or secondary) beneficiary on qualified retirement accounts like IRAs or 401(k)s is a common and often recommended strategy in estate planning, particularly for married individuals in California. Typically, you name your spouse as the primary beneficiary (who can then roll over the account tax-free, treat it as their own, and enjoy full spousal options like lifetime stretch distributions or spousal rollovers under IRS rules). The revocable living trust is then named as the contingent beneficiary to receive the account if the spouse predeceases you or disclaims it. This setup provides a safety net:

If the primary beneficiary (spouse) survives, the account passes directly to them outside of probate and trust terms.
If the primary fails (e.g., spouse predeceases or disclaims), the trust becomes the beneficiary, allowing the trust's provisions to control post-death distributions (e.g., for minor children, spendthrift protection, special needs beneficiaries, or staggered payouts to prevent mismanagement).

This avoids probate entirely because retirement accounts pass by beneficiary designation (contract law), not through the will or probate estate. It also sidesteps the need for a Heggstad petition or ownership transfer, since the account title remains in the individual's name—exactly where it must stay to preserve tax-deferred status. No immediate taxes or penalties are triggered during the owner's lifetime, as you're only updating the beneficiary form (a simple administrative change with the plan custodian or IRA provider).

Key requirements for the trust to work effectively as contingent beneficiary:

It must qualify as a see-through trust under IRS rules (valid under state law, irrevocable upon death, identifiable beneficiaries, and documentation provided to the custodian by October 31 of the year after death) to allow the "look-through" treatment for RMD purposes.
Under current rules (post-SECURE Act and SECURE 2.0, effective through 2025+), most non-spouse beneficiaries (including trusts) follow the 10-year rule (full depletion within 10 years of death), with potential annual RMDs required in some cases if the owner was already taking RMDs. This can accelerate taxes compared to older "stretch" rules, so the trust should be structured (e.g., as a conduit or accumulation trust) to manage distributions and tax impact.
Always review and update designations after life events (marriage, divorce, birth of children) to avoid defaults or outdated backups.

After the owner's death, if the trust ends up inheriting (as backup), the successor trustee manages distributions per trust terms while coordinating with the custodian for inherited IRA rules—no probate needed if properly designated. Coordinate with a tax advisor or estate attorney to ensure compliance with current IRS regulations (e.g., no changes from SECURE 2.0 that would alter this in 2025–2026). If after the owner's passing, and no beneficiary was named or the designation is invalid, the account may default to probate; in that case, use small estate affidavits (Probate Code § 13100 for values under $208,850 as of 2026) for quick transfers, or petition the court under § 13500 et seq. for spousal set-asides, or open limited probate for larger amounts to redirect via pour-over will or court order—always coordinating with a tax advisor to minimize income tax hits on inheritors.

EXPERIENCED HEGGSTAD ESTATE PLANNING ATTORNEY

At Schlau Rogers LLP, we regularly handle Heggstad petitions for financial assets with a tailored, efficient approach. Our small-firm model delivers direct attorney access (via email, text, call, or secure chat), complimentary initial consultations (including strategy sessions or house calls for convenience), fixed fees with flexible options (no hourly surprises), and advanced virtual platforms for encrypted document sharing, video meetings, updates, and payments. We use our simple process to build a strong evidentiary record and streamline filings, ensuring your loved one's financial legacy passes privately and quickly.

If bank accounts, investments, or securities were meant for the trust but left out, don't assume probate is inevitable. Contact us today for a no-obligation consultation. We're committed to delivering customized, results-driven solutions that protect what matters most—smarter and more personally.

For more information on trusts, you can explore our estate planning practice and Resources. To get started on your Heggstad petition, schedule a strategy session today. Keep planning smarter.

Matthew Schlau is a co-founding principal of Schlau|Rogers and an estate and business planning lawyer practicing in Orange, San Diego, Los Angeles and Riverside counties. He is a husband, father, blogger, crossfitter, and really good at helping people achieve their goals.

At Schlau|Rogers, we do more than just estate and business planning, probate and trust administration. Our objective is to provide individually-tailored plans that allow you the opportunity to reach your goals, all while minimizing headaches and risk, and maximizing peace of mind.

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