California Statute of frauds and real property – how placing property in trust does not require a deed

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.”