Trust Disputes, Deeds and Heggstad Petitions, with Laura Zolnekoff of VZ Law

0:03 For two for too many families a transition when somebody passes of assets, property, money, cash, stocks, bonds, you know, it's not a problem until it's a problem, but for too many families it's a problem. And that's why both before to avoid problems or afterwards to close the barn doors get the cows back in, you need a great attorney. Really lucky to have here, I think the newest partner or newest named partner of a recently renamed VZ Law, Paul Velasco, her partner who's been on the program numerous times. I'm really excited to have today Laura Zolnekoff, partner at VZ Law. Thanks for joining us, Laura.

0:37 Thanks for having me, Bill. I'm happy to be here. Now, you know, what I just the first I have to say is you seem too nice to be a probate litigator.

0:46 I don't know if all my opposing counsel would say the same. However, I find you get more flies with honey than you do vinegar.

0:55 Okay, well, I don't have as much honey as I will come with the vinegar. So litigation probate, you know, is one of those things where nobody plans to end up in litigation. Often times there's mistakes made that when two parties can agree with that mistake how it gets resolved, that ends up being litigated. Talk a bit about the most common things that bring you into litigation in probate case.

1:16 The most common thing that leads to litigation in a trust dispute is just lack of communication. And it's usually a trustee who is appointed by parents who often times was the oldest and who just doesn't know what they don't know. And they think they can handle it. They don't understand the probate code, how complex California probate trust law is. And they end up making mistakes. Only once when they get sued, do they then call an attorney and find out all the mistakes they've made and we've got to got to have to find a way to get them out of it.

1:52 Right. And so I think it's almost from the very beginning, right? When you talk about mistakes, one of the most common mistakes I've seen that that causes problems and may not cause the loss of the lawsuit, but certainly it starts things on the wrong foot is notice, right? There's certain strict requirements on letting other parties know certain information.

2:09 Exactly. And a lot of times people don't want to turn over copies of the trust to beneficiaries or disinherited children. And what they not what they may not realize is that even a disinherited child has a right to see a copy of the trust and contest it. And so what you need to do, the first thing is serve something called a notification by trustee. That notification is important because it starts the clock ticking on when a contest can be brought. It's 120 days from the date the notice is served. So once that 120 days passes and nobody has filed a lawsuit contesting the validity of the trust, you can really get into the nitty-gritty of trust administration. But if you don't start that clock, you could be two or three years down the line and then facing a contest of actions you took many years ago.

3:01 Now one of the questions I ask Tracie in this and I've heard different sides, different strategies and I'm sure it's case by case is for somebody who's been disinherited, in addition to the 120-day notice period, they're also entitled to a copy of documents if they would otherwise inherit at law, I believe. So if you're a son, let's say, being disinherited, even if you're being disinherited, you're entitled to a copy of the trust if requested in the right time period. And so the question then becomes, well, do you give them a copy day one to start the clock on that then, or do you run the 120-day clock and hope they don't say anything and the clock runs out? What's your approach on that or what are the common themes when you make that decision?

3:39 So it's a case-by-case basis and it really depends on the family dynamics and that's why this area of law is really unique because there are so many pieces and it's not black and white. I often tell people it's not like you're suing, you know, your contractor who promised to put a new roof on your house and just didn't show up and you paid him $5,000. It's clean. No, we're often dealing with 40, 50 years of family history, dynamics, resentments. And how those come out in each family is different. In certain cases, I would say, "Look, serve everything at the very beginning, the first chance you get so that we know from day one what the contest is and we can address it head-on from the beginning." In other cases, it may make more strategic sense to hold on and delay and see if there is a contest and additional documents are demanded. So, it's a case-by-case basis and every family is different.

4:36 I think it's a professional standards coming. I know for me as a real estate agent, same thing like on when do you notice of proposed action. And you know, on one hand, it's nice to get it when you're in a contract, but then if you have concessions, then you have to re-notice, perhaps, or may not or may not be able to or may not want to. Or you can use strategically to not make concessions. So, it all gets down to I think understanding your client and who the other parties are and working with them on that. So, we have the notice period and it seems to me as a real estate agent, I often get the "My brother's the administrator and he hasn't told me anything" call. But I think I'm guessing half the time they did get a notice of the intent to administer. They just didn't consider that as being significant. Is that is that your experience?

5:21 Right. What people really want to know is the money. Where is the money? When am I getting it? What are you doing with the money? What are you spending it on? So, getting a copy of the trust it is almost second base to them. They want to focus on first base, which is when am I getting my money? And they don't understand a trustee doesn't have to account the first month they're trustee. Usually, it's annually. And it starts a year after the decedent passed. So, let's say mom died June 29th, 2026. If I serve a notification by trustee, I really don't plan to account until June 29th, 2027. But that accounting is usually what makes people feel and beneficiaries feel suspicious and motivated to file lawsuits compelling information regarding the accounts.

6:16 Who's entitled to get a copy of the accounting? The people who are entitled to an accounting are those for whom income and principal has been left behind. So, if you're a beneficiary, you're entitled to an accounting of the trust. If you're an heir at law, meaning you were disinherited, you're not entitled to an accounting of the trust because you don't have an entitlement to any income or principal of the trust. However, what I find people do and they think it's kind of cute is leaving somebody $1 or $5 or a small amount. All that does is give them standing in court to seek information. You're better off if you're going to do that, just disinheriting somebody.

6:59 Mhm. Mhm. Interesting. I mean, I guess I guess a relative, right? I mean, to some people instead of a million, 50,000 could be insignificant, yet 50,000 is still 50,000. So, I guess it's one of those things again, case by case you have to go through. But I think I often hear from people tell me they haven't told me anything. In reality, they did get a notice of intent to administer within the 120 days and they're not entitled to an accounting for a year. So, it seems like you're not being told anything, but in reality, you're being told everything that you're entitled to.

7:28 Right. And they don't need to involve beneficiaries in day-to-day decisions. The cleanout of the property or hiring a real estate agent, they don't need to be involved in that. But oftentimes when it's siblings and there's family resentments, the fact that they're not involved creates that sense of distrust and, you know, feelings of, "Hey, I'm not being told anything." When in fact, you're not really entitled to be told something, and a trustee doesn't have a duty to keep you in the loop on the day-to-day minutia of it.

8:00 And at the same time, I think the mister can create problems by giving them the day-to-day minutia, right? If you tell them you're going to clean up the property and it's going to cost $3,000, everybody overreacts to every expense out of their pocket, right? So, it's one of those things where you have to kind of careful what you do disclose because you might be creating, you know, opening Pandora's Box unwittingly.

8:21 Exactly. And if you know you have a sibling or a beneficiary that's going to be oppositional no matter what you do, even if it is perfect, sometimes that can delay administration and increase costs for everybody to have a lawyer involved every single step of the way disclosing this information.

8:38 Right. Right. It's funny, people say, "Well, you know, the attorneys are just milking this case for all it's worth." Meanwhile, the objectors getting the attorney to make every decision and fight every decision, and file papers every decision. So, of course, it causes everybody to have to respond in an appropriate way. So, those are challenging. One of the one of the common solutions I've seen that helps move things forward, I think it's still somewhat underutilized cuz it's expensive, though not as expensive as litigation, is using a professional to act as a fiduciary rather than administrator. Though it's not foolproof, I'm sure you've seen the same thing that you can get an opinion of fiduciary and both sides hate on them as much as they do on each other, which is interesting. But in general, at least you're getting a better standard of care, standard of administration, professional administration. So, talk a bit about, you know, maybe it I'm sure on one hand, you're always hesitant to spend other people's money. On the other hand, if there's multiple beneficiaries involved, why would an administrator hire somebody to do what is their job when they don't need to pay them to do that?

9:41 Hiring a professional fiduciary in an estate where you know you have beneficiaries that are going to fight is usually the most cost-effective solution. Because when you have two siblings usually who are fighting, that's going to drain the entire estate of everything that's in it. It's better to pay a little bit more up front and hire a professional fiduciary who's neutral, who knows the rules, who does this for a living to make sure all the Ts are crossed and Is are dotted. It ends up, although an upfront expense, saving the trust estate a lot of money in litigation fees.

10:17 Everything seems to move a lot faster when you have a professional making decisions. I know as a realtor, I love it because now I'm dealing with a professional who makes these decisions all the time, even the tough decisions. They're often, you know, tough decisions. The buyer's backing out or they're asking for big concessions, but these are decisions we need to make and handle the consequences. And I know working with professionals, more often than not, we can move forward quickly and do things we have to do. So, I'm a big advocate on that. So, I know one of the areas that you get involved with a lot is in terms of working with deeds where there's problems that they're created. I think, you know, I see a lot of do-it-yourself deeds where I literally had one come to me on Friday where you can just see that the it was the classic case of the son-in-law and the father. And I think there's certain cultures that the property's kept amongst the male that was kind of traditionally the case. And so, even though it's their daughter, they put it in the name of the son-in-law and the wife is completely written out. So, theoretically, you know, if the husband gets divorced, it's all he has if the father passes away. Talk about the dangers and perils of doing deeds on your own and what are the common problems that you see or mistakes that you see?

11:25 Well, again, this is a case of you don't know what you don't know. And anybody can go on LegalZoom or Google and now even chat GPT and come up with a deed. However, every word on the deed has a legal effect and it has significance that unless you're trained in every classification, you're not going to really know what you're doing. the example you just brought up an interspousal transfer deed. When a wife signs it over to the husband or when somebody's name is put on title for financing, that's probably one of the most common issues that we deal with. It's where an asset is taken on title out of a trust and put into an individual's name and let's say son-in-law is added on so that they can get a loan and refinance it and get better terms. What ends up happening is let's say dad dies, it's now the son-in-law's property and the mom has no rights to it. And we then have to go into court and file a complaint for quiet title and to set it aside. say mom didn't know what she was signing, there was undue influence, she was just doing what dad told her, that was the nature and dynamics of the relationship. And it was always meant to be mom and dad's together, son-in-law was added just for financing only.

12:49 However, when you do that, son then brought something of value to the transaction if they did get a loan. So, deeds are really important and how you transfer them to other people whose name you add to title, that's going to control over anything a trust says. So, if mom and dad had a trust that said 123 Main Street is ours and when dad dies it goes to mom, but then dad took it out of the trust, added son-in-law to the deed, well, it's no longer a trust asset then and it's not governed by the trust provisions. That could make it so dad did something that unintentionally hurt mom just because he didn't know what he didn't know.

13:33 And you know in this case the deed was just the name of the father. It didn't say how he was taking title. Was it sole and separate or community property? So he's deeding it to the son-in-law who also it doesn't say how he's holding title. So you have these two men whose title is a community property? Is it is this you know separate property? Is it prior property from before they were married? There's just all kinds of opportunity for litigation. And the day they wrote the deed they're all best friends. It's only the day that one wants to do something it becomes a problem, right? That's the day they call you and say he cheated me.

14:05 Right. Right. Everyone says no, I'll trust my son-in-law. He would never do anything and then 15 years later there's family turmoil.

14:13 Yeah. I will say my father was an attorney and my wife when we got married he said to me, I just want to let you know if there was a dispute I'm I'm going to side with her. She's much more reasonable than you are. So I kind of knew where I was from the beginning. So okay. So and I think and a good general rule is you know as you know anybody can write a deed especially now with chat GPT. Anybody can record the deed. You go to the county recorder or use a service. But it doesn't mean it has effect. I always tell people if you don't have title insurance you probably need an attorney to double check exactly what you're doing. The title insurance sometimes is a good a good check cuz they won't allow it to go through unless it meets certain criteria. but it just seems to me that any of these deeds that involve you know succession or transfer or qualifying for a loan, those are all like should be red flags if you're not getting an attorney or title insurance on it. In this case they had title insurance. The title insurance just basically insured a mess I think in my case.

15:06 Right. No, I'm dealing with a case right now where a gentleman bought a property individually on his own put it in his trust, later got married and added his wife onto the deed, but he transferred it from himself as an individual to he and his wife as joint tenants, which creates a right of survivorship. However, he individually didn't hold title to the property when he did this deed. The trust held title to the property. So, he missed that middle step of transferring it out of the trust to himself and then to he and his wife. And so now the wife has a deed that's really void of a fact. It's It doesn't matter because you can't transfer an interest in property you don't have. And of course, he did it using chat GPT and then passed away. So, we have this chain of title of recorded documents that are not valid because it's missing the middle step.

16:09 And I think the thing I often tell, you know, estate attorneys or to clients, it might be you can do the deed. It just might be that you can't sell the property, right? Or refinance the property because you don't have a title clear then the title company will say to you, "Oh, all you need All you need to do is get a court order correcting the title." Oh, "I'll just go down to 7-Eleven and buy a court order. That's no How hard could that be?"

16:31 Yeah. Yeah. And so, one of the common areas I know we spoke about before we started recording was in California a unique case, Heggstad, where I think this deals with a case where property was not put in the trust, but the court felt they had sufficient evidence to determine that that was the clear intent of the of the Whoa, what's the term for the person who makes the trust? The Not the grantor. The grantor, I guess. it was a clear intention, but it didn't happen or got taken out or something happened along the way. Talk a bit about what Heggstad petitions can cure and what they can't cure.

17:09 Right. So, Heggstad is a case that is a huge benefit to all people who may just forget the procedural steps that follow creating a trust. What Heggstad says is, if the court can tell that it was really, let's say, Bill's intention to include 123 Main Street in his trust, and he just goofed and never did the deed, but it's in his trust, it's listed as a trust asset, he wants it to go to his wife or his kids or however it's to be distributed, and he just forgot that last step, well, the court can take a position that there's enough evidence to confirm it as a trust asset. And that's what's kind of cool about probate courts, is they're a court of equity. So, intent matters, and what your intentions are and how you show them matters. The bad part about that is it's subjective. So, what one judge finds as sufficient evidence to show intent may be different than what another judge decides. So, the best course of action is to always just make sure it's funded, meaning the deed matches the trust from the beginning. But, if a mistake happens, there are ways to fix it, and it's it's going to cost you, but it's cheaper than putting a house through probate, which would be your only other option if it's not a trust asset.

18:29 I love when I talk to somebody they say, "Oh, all I have to do is a Heggstad petition." I'm like, "Oh, yeah, well, you know, in LA County, from the day you file that petition, you're not going to get a hearing for 6 months. And it's going to cost you, I wouldn't say as much as a probate, but a good chunk of what a probate cost. It's not free. Like, you're not you're not just doing it as a service. That's a whole thing to do a Heggstad petition. How long does it typically take to get the actual court order that you can then move the deed, and you know, what kind of expenses are talking about if you can talk a little bit about it in broad terms? I'm sure there's a variance, but

19:01 Yeah, there's slight variances. Usually, it takes about 6 to 8 months for the whole process to be completed in LA County. Every county is also a little different. In County, they're setting hearings a little further out than LA County right now. But assuming that your attorney has done everything perfectly from the beginning, assuming that the court has no questions, assuming it's a very basic Heggstad where a trustor in a trust list the property as a trust asset, it's going to be relatively easy and quick. The issues are going to arise if intent isn't clear, if there's just a catchall in the trust saying all of my property, if the judge wants more evidence of intention, if a trust was done on like a LegalZoom or by a paralegal service, those types of trust become a little more complicated because they're not drafted specifically for a person. Usually it's some type of form-based program that those services use. so that's what could complicate it. But if it's a run-of-the-mill Heggstad petition, I usually tell people about 8 months, count on somewhere between 5 and 10,000 dollars.

20:18 Yeah, it's it's not like when you're at 7-Eleven picking up a Coke. It's it's still a whole legal process. And yeah, and I will say though I'm forever indebted to your partner. I went to Professional Fiduciaries Advisory Council, PFAC, in Signal Hill and he gave a presentation on Heggstad petitions. And he had a packet he handed out with the filings or sample filings of one he had done. And I just found it so fascinating A that to learn that content, to be able to help customers at least point them in their direction and say, "Hey, here's a process and here's a guy you can call who can help you with it." And I have. And B, I just felt that he was so generous with his time and educating, you know, people like me who aren't attorneys but also I guess competitors who or attorneys who maybe would say, "Well, I'm not going to do all that, but I can refer it to Paul and maybe Paul will refer me a drunk driver case or something, whatever however that works. But I have to say I'm I'm just for That was like the highest standard of legal marketing I've ever seen in my career and just forever I hold I hold them in high esteem for that reason alone. So, obviously really impressed with you being this partner. So, let's talk about let's go back to litigation issues. We talked a little bit about notice, we talked about deeds. You know, what are other common not in let's say not just in trust issues, but even in probate issues. What are the more common things that you see that cause problems that people are arguing over? Meaning, are they arguing over the wording of the distribution? Do they argue over the appointment of the administrator? What are the common things that you see in litigation that are common areas of contention that perhaps people can avoid by being more effective up front?

21:58 This is circling back to my beginning comments, it's always over money. And usually when somebody begins their tenure as trustee, it takes a few weeks to get accounts set up and things like that. So, they're commingling. or another hot-button issue is jointly titled accounts. So, a lot of elderly people add the son or daughter, whoever is their primary caregiver helping them write out checks to bank accounts. What they don't realize is when they add somebody on title to a bank account, when they die, it goes to that survivor. It's not a trust asset. So, for example, if I had two children and I named child A as my co-owner, when I die, child B gets nothing from that account. And that's usually the start of the problems. Child B says, "No, wait. Mom always wanted everything to be a trust asset split equally. You don't get this account with a hundred thousand dollars in it just because you're on title. You were on title because Mom had Parkinson's and couldn't sign her checks. Mom's handwriting got shaky. That's the only reason you were on there was for convenience. That is probably one of the most common financial disputes I see.

23:16 And then the second is when people commingle their own money and they don't account for it or when you do account, it makes it so your personal finances are open to discovery because you did commingle. Then clients are upset, "Hey, how does my brother get access to my bank accounts?" Well, you were depositing money in there from mom and then paying mom's expenses out of it. So, people really need to think of themselves as a fiduciary, not as a brother, sister, child, but as a fiduciary. You wouldn't want your Charles Schwab wealth manager borrowing money from you, is essentially what's happening and then using your money or his money to pay your bills and mixing them up. You have to keep things completely separate.

24:03 Now, I'm sure in most probates and trust administration there's real estate being sold. I'm sure you deal with real estate agents on a regular basis. obviously I do this podcast try to raise the standard of our of our profession. What are the one or two of the best practices you see of real estate agents that really service their clients well and or assist you in doing that or one or two mistakes you see made regularly that you wish that you could wave a magical wand and see that go away?

24:29 The best thing a real estate agent who's representing a trustee can do is advocate for them to send out a notice of proposed action. Because the sale of real estate is probably the biggest task that a trustee will take on, it's really important that they cover their own bases if for nothing else but to protect themselves. And most trusts say the trustee has authority to sell the property without court order or court supervision. However, just to make sure you're safe and prevent liability, a good real estate agent will say, "Look, let's serve a notice of proposed action on all beneficiaries and allow them a time period to object. If they don't object, we can close escrow and you've given them notice, they've released you, they've said, "We're not going to sue you over the sale. We agree with the sale price." And if they do object, you can get court confirmation. I can't tell you how many trials I've done where the trustee is being sued for selling a property for what the beneficiary thinks is below market, for making improvements at a property for what the beneficiary thinks didn't produce a benefit, hiring a real estate agent that a beneficiary thinks has a conflict. If you serve a notice of proposed action, it's a small price to pay to wait a 45-day window for somebody to object to be sure that you won't be sued and if you are, you've got a pretty strong defense that they were put on notice of all this and didn't object to it.

26:04 So, that's an interesting question on real estate sales because it's pretty common the transaction is the buyer's going to come back and ask for some concessions. Now, some most time they're it's just negotiating tactic. Occasionally, something is uncovered that it's reasonable. They didn't have any way of knowing this before they did a professional inspection. The guy went into the roof and discovered some sort of defect that has to be addressed by somebody. And obviously, there's certain leverage to say, "Well, if I have to disclose that, you have to wait through the notice period." on the other hand, you know, you run the risk of one of those people now objecting cuz they already got they already told you're going to sell it for 900,000, now you're coming back and saying effectively it's 875. It's almost like you're asking for somebody to object. What's your strategy on should you wait till you have the concessions done or should you wait you know contingencies are waived or should you do it right away try to flush out or again is it case by case?

26:59 So it's case by case. It depends on the buyers, the type of property. do we believe that there is going to be a lot of concessions made? But one strategy I like that I find pretty effective is talking to the real estate agent and really working as a team with them. saying okay what do you realistically think the lowest sale price is going to be for this? Bill says hey look this house is worth 950,000. I think there's going to be a $50,000 credit. My notice of proposed action would set a floor saying we will sell this. We're listing it with Bill Gross. We're paying X Y and Z commission. We are not going to accept any offer below $900,000.

27:46 Oh. And if you get everyone to consent to that at the time of listing, then that kind of starts eating up the clock. So by the time an offer is received and you accept it, you're not then starting the notice period again.

28:01 I like that. I never I never heard of that before. Everyone I've ever done do with the actual contract and do the notice on the actual terms. I feel like that's so strict because it's so common and if you if you don't go along with it, you just run the risk of breaking deals that otherwise you don't want to break. You know another area that I've gotten involved with recently is on improvements during the probate or during the trust administration. And you know I'm a professional and tell you my opinion I could be wrong but feel pretty strongly looking at the data that there's very little a family can do to improve net the value of the property other than safety and security of a property. There's not much really you can do. You can't really remodel your way into a profit. You can't repaint your way into a profit. But people are told they are and that's a discussion with a client. But, I was recently kind of reviewing this and I, you know, on my favorite artificial intelligence came back with some legal issues saying that there's a lot of risk on the administrator that if you do this work, if there's, you know, risks, if there's if there's lawsuits, if there's mechanics liens, if there's delays, all of these are things that an ordinary so, you know, assumes, then the administrator really has a heightened sense of responsibility for How do you Where do you stand out or where do you come out on when a you know, an administrator says, "We want to repaint and maybe we're going to redo the cabin cabins in the kitchen. It's going to take $20,000 and maybe 6 months or 3 months." What's your best advice to them in those circumstances?

29:26 Well, this is where I circle back to private professional fiduciary. They're going to look at the pros and cons, the time of making the repairs, the estimated benefit, the risk associated with it. And most of the time a private professional fiduciary is going to find it's not financially prudent to do that and to make all these repairs. You're not going to make it back. The market is what it is, and if you're selling to an investor, a new buyer, likely they're going to want to make their own improvements. small things like painting, that I could see if it's a small charge. But, generally, I lean more towards sell it as is, sell it as quickly as possible, get the money in the account so you can administer the trust. And again, once people know they have money coming, they tend to not be as aggressive with litigation. It's the waiting while improvements are happening and the liability that accompanies improvements and the, you know, Monday morning quarterbacking of

30:25 Right. You shouldn't have done this. I could have done this better. it leads to a lot of problems when the intention, when you decide to make the improvements, is usually good.

30:35 And I was just kind of reading through like the risks of holding the property past a certain period. Now you're in risks of reassessments, you run risks of pro- filing have filed taxes in the next calendar year cuz they didn't have a profit on the property. and I always try to tell people, putting lipstick on a $20 bill doesn't make worth $21. It's still a $20 bill. So, sorry about that. Well, look, I got a little over time with you, Laura. Obviously, we have a lot to talk about. I really enjoyed our time together. I've really enjoyed seeing you I guess officially reorganized the law firm with my favorite attorneys in Southern California. congratulations on this on this I don't know what it is, achievement, success, milestone in your career. And thank you so much for joining us here on Probate Weekly. If you want more, talk to Laura about matters regarding probate, you can get her, let me see real quick, the website is [vzlawoffices.com]. Pretty little palm tree there, and you can you can call in. They have a phone number, and you can talk to them individually, get appointment, and get some help. And then also, we can get a hold of Laura, phone number. I think we have the right number here, 562-457-9582.

31:46 No, it's 432-5541. Okay, so there you go. That's what's That's what's good to ask. Let me see here. There you go. I got I have the right number. Watch this, guys. I'm going to do I'm going to do production work here myself and just right in front of your eyes, you're going to see the magic of my production team. How's this? One two. How's that? 5 562-432-5541 is the right phone number to get a hold of Laura. Or, if you're watching this while or listening to this while you're driving, feel free to reach out to me. I'd be honored. Like I said, I've I've worked with her firm for a while and feel very strongly they're I think Paul's one of the best, and haven't had a chance to work on a case yet myself, but looking forward to that when the time comes. Laura, thank you so much for your time today. I really appreciate it.

32:28 Thank you, Bill. Happy to be here. And for sure, this is Probate Weekly. We get a chance to talk to probate attorneys, administration, trust administration, litigation, or vendors. And this particular had a great trust litigator. Hope you got a lot of it. I know I did. I'd love to get your comments. Please like, subscribe, send me comments. If you have questions, reach out. I'm at Bill Gross Probate on social media. And as always, make today your best day ever.