Create a living trust in California

A California living trust is a legal document that places some or all of your assets in the control of a trust during your lifetime. You continue to be able to use the assets, for example, you would live in and maintain a home that is placed in trust. After your death, the living trust California assets are passed to the people you have selected as beneficiaries. Living trusts are a popular estate planning tool.

Living trusts in California

When creating a living trust in California, you are able to maintain control of the entire process. As the grantor, you decide who to choose as trustee, the person who will manage the assets during your life and distribute them after your death. You can choose anyone as trustee and can even be trustee yourself, but you will need a successor trustee to manage the process after you die. The trust directs the trustee to manage the assets for your benefit during your life and distribute them according to the trust’s instructions after you pass.

You choose the assets you place in the trust and you can select as many or as few as you like. You name the beneficiaries (the people the assets will go to) and determine when and how they receive your assets. A revocable living trust can be altered or cancelled by you at any time during life, while an irrevocable trust becomes permanent.

One of the benefits of a California living trust is that it allows you to bypass probate for all assets in the trust. California has not fully adopted the Uniform Probate Code, so its probate law provisions are not simplified. Assets not included in a trust pass according to your will and go through the probate process which can take many months to complete. California offers a simplified probate process for estates under $100,000, however anyone who owns a home in California is likely over that threshold. Regular probate procedures involves executor and attorney fees. If you die without a will and without a trust, your assets are distributed in accordance with California’s intestacy statutes, which decide how your relatives divide your assets.

Do I need a living trust in California?

Choosing to create a living trust in California is an option that provides you with a lot of control over your assets.  A trust lets you decide when and how your assets are distributed to your beneficiaries. You can give certain amounts at landmark birthdays or at events such as graduations. Assets can be passed during your life or after. If you rely on a will, all of your assets are passed at once after the will has completed the probate process. You also have the freedom to choose which assets go into the trust, while a will covers everything you own.

Another important benefit of a living trust is the privacy it affords. The probate process is a matter of public record. In contrast, trust documents do not enter the court system, and their assets, amounts, terms, and beneficiaries are never made public.

Living trusts provide protections during your lifetime as well. Should you become incapacitated and unable to manage your own affairs, the trust is already in place, with control of all assets in the hands of your trustee. You may need no further documents or procedures for your assets to be managed and protected.

Living trusts and estate taxes in California

Although there is no estate tax levied by the state of California, the federal government does apply estate tax to estates in excess of the current $5.4 million exemption. A living trust can help you avoid taxes if your estate is larger than this if it is formulated as an AB trust, sometimes called a QTIP or marital trust. In this specific type of trust, assets pass from one spouse to another directly, avoiding the application of any estate tax on the transfer. Note that living trusts do not shield your assets from Medicaid laws.

How to create a living trust in California

California living trusts are created with a trust document. The document is a legal contract that sets up the trust and details how it will be run and distributed. As the grantor, you sign the document in front of a notary. After the document is signed, you transfer ownership of the assets you would like in the trust, and the trust becomes functional.