What is a living trust in California?

The ins and outs of California living trusts

A living trust is an important estate planning tool for California residents. It allows you to manage your assets and property during your lifetime, as well as providing a way to pass on those assets after death with minimal probate costs. In essence, it serves the same purpose as a will but in many cases can be more advantageous in terms of tax savings and protecting privacy. This article explains the basics of creating and managing a living trust in California.

A complete estate plan consists of the following 5 essential documents:  (1) Revocable Living Trust (2) Certification of Trust (3) Pour-over Will (4) Durable Power of Attorney (5) Healthcare Directive.

By creating a living trust and transferring all of your assets into the newly created living trust, you will save your loved ones the stress and cost involved in going through the probate process after you die.  Probate is the judicial process of having the courts determine your rightful heirs and the court ordering the distribution of your assets.

What is a living trust in California?

The first step in setting up a living trust is to clearly outline your wishes.  Most trust companies use a living trust questionnaire to help you organize your thoughts and put your wishes down on paper.

The main difference between a living trust and a will is the necessity for your loved ones to use the judicial process called probate to distribute your assets to your beneficiaries.  A properly funded living trust will not require probate whereas a will always requires a form of probate for the distribution of assets such as real estate or bank accounts.

Benefits of setting up a living trust in California

The potential benefits of setting up a living trust in California includes avoiding probate and privacy.  Living Trusts are private documents that cannot be viewed by the general public, whereas a will becomes a public document through the probate process.  All probate filings are public and can be viewed by anyone who requests copies from the court.

How to create a living trust in California

The steps involved in creating a living trust in California are: 

1. Complete the Living Trust Questionnaire. 
2. Send the questionnaire to our office  or to the office that will be preparing your documents.
3. Once the draft trust is prepared, it is sent to you for review. 
4. Once reviewed, you sign and notarize the documents.
5. Once the documents are signed and notarized the deed for any properties which are being transferred into your newly created trust are recorded. 
6. Other assets are transferred into your newly created trust according to the instructions provided to you at the time of signing.

The only document that needs to be completed to start the process is the living trust questionnaire.

Trustor vs. Trustee

A trustor and a trustee are key roles in a trust arrangement. They play distinct roles in the establishment and management of a trust. Here’s an explanation of each:

Trustor (also known as Settlor or Grantor): The trustor is the person who creates the trust. They are the individual who transfers their assets, such as property, money, or investments, into the trust for the benefit of one or more beneficiaries. The trustor’s primary role is to set the terms and conditions of the trust, including specifying the beneficiaries, determining how the assets should be managed, and outlining the purposes for which the assets are to be used. The trustor’s wishes are typically documented in a legal document called the “trust agreement” or “trust instrument.” After creating the trust, the trustor transfers ownership of the assets to the trustee, who will manage them according to the trust’s terms.

Trustee: The trustee is the person or entity (such as a bank or a trust company) responsible for managing and administering the assets held in the trust on behalf of the beneficiaries. The trustee’s duty is to act in the best interests of the beneficiaries and to follow the instructions outlined in the trust agreement. Depending on the terms of the trust, the trustee may have various responsibilities, such as investing the assets, distributing income and/or principal to the beneficiaries, and making decisions regarding the trust assets. Trustees have a fiduciary duty to act with loyalty, prudence, and in good faith in managing the trust for the beneficiaries benefit.

In summary, the trustor is the person who establishes the trust and funds it with assets, while the trustee is the person or entity appointed to manage and administer the trust assets according to the trust’s terms for the benefit of the beneficiaries. It’s important to note that in some cases, the trustor and trustee can be the same person or entity, but often they are different parties fulfilling distinct roles in the trust arrangement.

California living trust vs. will: Which is right for me?

It’s always better to have a living trust vs. a will in California.  The main difference between a living trust and a will is the necessity for your loved ones to use the judicial process called probate to distribute your assets to your beneficiaries.  A properly funded living trust will not require probate whereas a will always require a form of probate for the distribution of assets such as real estate or bank accounts.  

The general rule is:  If you have minor children, real estate, or bank accounts with a combined balance over$166,250, it’s a good idea to get a living trust in order to avoid probate.

Avoiding probate with a California living trust

By having a properly funded living trust, your loved ones can avoid the probate process in California, but a will always requires a form of probate for the distribution of assets such as real estate or bank accounts.  

The potential benefits of avoiding probate is the cost, stress, and time involved in going through a long drawn-out judicial court process.

California living trust requirements: What you need to know

The only document that needs to be completed to set up a living trust in California is a Living Trust Questionnaire.  Once your wishes are organized on a questionnaire, the information you provide is used to put together a probate avoidance revocable living trust. The biggest challenge is waiting too long and not getting a living trust created before you die.

Final thoughts on California living trusts

When it comes to estate planning, setting up a living trust in California is a great way to ensure that your assets are distributed according to your wishes and to avoid probate. With the right legal help, you can easily create a comprehensive plan for yourself or loved ones. The key is getting started early so everything will be handled properly when the time comes. If you have any questions about creating a living trust in California, don’t hesitate to contact us today – we would love to help!

Laguna Legal has been helping our clients create living trusts for over 24 years.  Every family should have a living trust but not everyone needs to hire an expensive attorney to set one up.  We specialize in making the process of creating legal documents simple, smooth and affordable.