Updating Your Schedule of Trust Assets

Posted on October 27, 2010

Most estate planning practitioners, when drafting living trust-based estate plans, include a schedule of assets as an attachment to the document. They do this to make clear the extent of the property that the Trustmaker intends to be included within the control and ownership of the trust.

This schedule of assets (which, for convenience I’ll call Schedule A since that’s what it usually gets called) can be either temporary or permanent.  I’m writing this because confusion seems to reign in the mind of clients about the temporary nature of the Schedule, which is the case for most trusts.

To get it out of the way, let’s first talk about when the Schedule A is a permanent fixture of the trust that needs to be updated and maintained.  I practice law in California, which is a community property jurisdiction.  Whenever the Schedule A is used to delineate separate property from community property, there is usually a recitation in the trust stating that the Schedule A will be kept and maintained in this manner for this purpose.  There is also usually a recitation that whatever character the property had when it went into the trust (separate or community), it will retain that character while in the trust.  A later  separate written agreement can change that.  Sometimes that written agreement is part of the Schedules of Assets (plural, as in community and separate property trust schedules).  Occasionally, another schedule will be maintained showing lifetime gifts made to various beneficiaries, with an accompanying clause in the trust addressing the lifetime gifting arrangement.

Other than these special circumstances, the primary function of a schedule of trust assets is for it to act as a bridge until the formal title of the assets can be changed with the asset holders, such as banks, brokerage houses, or the county recorder, in the case of deeds to real property.  After the title on all the assets has been changed into the name of the trust, the job of the Trustmaker thereafter is to make sure that every asset acquired after formation of the trust is acquired in the name of the trustee of the trust, naming the trust as owner.  If this is faithfully done, the schedule of trust assets becomes basically irrelevant.

The one fly in the ointment in this typical scenario is when the Trustmaker never completes transfer of all the assets intended to be controlled by the trust.  In that case, since title controls everything in estate planning, confusion is introduced, usually on the death or disability of the Trustmaker.  In that case, having the asset listed on the Schedule A is crucial so that the successor trustee can properly assert trust ownership and control over the asset.  In order to do this, sometimes a court petition is required as an alternative to either a living probate (in California known as a conservatorship) or a death probate.  In California, we have a favorable appellate court ruling that facilitates this avoidance of probate for property listed on the Schedule A for which the formal re-titling into the trust was never completed.  Estate of Heggstad (1993) 16 Cal.App.4th 943, 20 Cal.Rptr.2d 433  In fact, there is a fairly standard form of petition that courts throughout California routinely refer to as a Heggstad petition.

My sole intent in writing this is to relieve clients and friends from unnecessarily being under the tyranny of believing the Schedule A must be continually updated.  If you are faithfully vesting all newly acquired property in the name of the trust, naming the trustee and date of the trust, you are doing what you need to do and can rest easy, assuming all property listed on the Schedule A was transferred into the name of the trust and its trustee.

One Response to “Updating Your Schedule of Trust Assets”

  1. Hello Mr. Cleary,

    I came across your article and wanted to commend you on a well written summary of this topic. Great work!