California Statute of frauds and real property - how placing property in trust does not require a deed
The statute of frauds is legislation developed to prevent fraud by requiring a writing for several forms of agreement. The idea is that these transactions are too important to be left to claims of oral agreements. An important topic addressed by the statute of frauds is real estate. Covered are agreements for the sale, gift, financing, leasing for longer than one year, and contracts that cannot be performed within one year. (California Civil Code section 1624). The contract (called the 'Memorandum") must identify the subject matter of the contract and the parties; indicate that a contract has been made or offered by the person signing the memorandum; and state the essential terms of the agreement. If it is for the sale of real property, it must name the parties, identify the property, and set forth the price and terms of payment with a reasonable degree of certainty. Sacramento real estate attorneys rarely see real estate contracts that do not satisfy the statute of frauds except in old law books.
But there are different rules when it comes to trusts. Trusts are governed by the Probate Code, and in a recent decision a creditor was disappointed to learn how little it takes to satisfy the statute of frauds.
In Ukkestad v. RBS Asset Finance, Inc., Larry created a trust, and then died. His creditor wanted to go after some real estate in Vista and Indio that he owned, claiming that it had not been conveyed to the trust.
Common practice is to record a deed granting the property to the trustee of the trust. That was not done here, and the creditor argued that there was not a sufficient description of the real property. The court disagreed.
The trust instrument stated:
"The Grantor [i.e., Mabee], by the execution of this instrument, hereby assigns, grants and conveys to the Trustees of this instrument all of the Grantor's right, title and interest in and to all of his real and personal property, including all Tangible Personal Property, stocks, bonds, cash, mutual funds and promissory notes, all amounts on deposit from time to time at any bank, savings and loan association or investment institution, real property, leases on real property, interests in business entities and all other property owned by the Grantor, wherever situated.... The Grantor intends this assignment to be effective as of the date of this instrument even though other documents may be necessary to perfect title to such property in the name of the Trustees."
Real property may be made part of a trust's assets if two requirements are met:
1. The owner of the real property is the settlor creating the trust with himself or herself as the trustee.
2. Compliance with the statute of frauds.
The statute of frauds in Probate Code section 15206 states: "A trust in relation to real property is not valid unless evidenced ...:
(a) By a written instrument signed by the trustee ....
(b) By a written instrument conveying the trust property signed by the settlor
(c) By operation of law."
The Supreme Court has stated that a memorandum is sufficient to convey real property if it describes the land such that it could be identified " with reasonable certainty." If the description merely contains the "means or key" by which the actual description may be determined and located on the ground.
Here, the question was whether the language Larry used in trust was sufficient. It stated that he is conveying "all of his real and personal property" to the trustee, including "real property ... wherever situated."
This court found the description to be sufficient. One could do a title search and find all the real estate Larry owned. The court noted a decision in which the description was insufficient - the trust referenced property in an attached schedule A, but there was no schedule attached. Larry's trust had the magic words.