A Cautionary Tale: Beware the Aftermath of the Pre-2008 Refi Boom

We assist a lot of our clients with their Living Trusts. Many people don’t realize it’s not enough to create one—it has to be funded—and just as important—updated when there are important life events. One recent client was referred to us by her realtor—she is trying to sell her property, which she thought was in her Living Trust. 

Remember the wild west refi market of pre-2008?

She and her late husband created their Trust in 2000 and put their Hayward property in that Trust. They refinanced in 2001 to leverage lower interest rates, and the property was removed for the purpose of the refi—and, unfortunately, was not moved back into the Trust. Think back to the Wild West environment of the mortgage industry pre-2008—these companies couldn’t process refi’s fast enough. The lenders were eager to help people take property out of their Trusts, but in some cases, there was little regard to whether or not it ever got transferred back into that Trust.

Vesting a deed to avoid Probate

But the greater error is that the 2001 deed does not list any vesting. Usually husband and wife hold title as “Joint Tenants” or “Community Property with Right of Survivorship” so that there is no Probate if one party dies. That poorly drawn deed had no such vesting, a very negligent act on the part of the people who prepared the deed, so the presumption is that they held title as Tenants in Common, which requires court intervention, now that the husband died.

The title company advised her to do a “Heggstad Petition”

A “Heggstad Petition” is a relatively simple probate court proceeding confirming that the property should have received title in the name of the Trust. This would be an easy proceeding to pursue because the Trust has a schedule of property that should be titled in the Trust, and it lists the property on it. And there is a Pour-Over Will that would result in the property’s going to the Trust if full administration were undertaken. 

Unfortunately, this was not so easy: too many missing children

One critical detail: our client does not have contact with any of her late husband’s six surviving children, and is unsure of the identities of some of the issue of his two predeceased children (a total of four). These natural heirs of her husband are entitled to notice of the hearing on her petition. 

So not only is a court proceeding needed, but she needs to dig up identities and contact information for all of these ungrateful children who had very little meaningful contact with their father before he died. This is a nightmare that will take time and money to try to discover the identities of these children. 

At an impasse: A victim of professionals not doing their jobs

A compendium of errors by careless professionals is essentially torpedoing her real estate transaction, causing unbelievable anguish. The tragedy is that she can’t do anything with this property until she has clear title.

We encourage all couples who have been procrastinating to come in to one of our California Document Preparers offices to update your deed to reflect your new domestic relationship. It’s a simple procedure that can usually be completed in a day.