Two men sitting by the water and talking about creating a Living Trust in California.

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Creating a Living Trust in California - What You Need to Know

If you live in California and are considering creating a living trust, read this guide to learn more about requirements, cost, and more.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

An estate plan gives you legal control over what happens to your property and assets after you pass away. For this reason, estate planning documents are some of the most powerful instruments you could use in your lifetime. One such tool is the Living Trust. Individuals who elect to use a Trust as a part of their estate plans often do so for added control and flexibility. Further, property transferred to a Trust are removed from the probate process. If you live in California, this is something worth paying attention to. Probate is notoriously taking a long time in the Golden State, making Living Trusts an even more attractive option. This guide will introduce you to what you need to know about Living Trust California

What is a Living Trust?

A Living Trust is a fiduciary agreement that comes in the form of a legal document. In other words, you are authorizing the Trust as well as your named trustee to own and manage your property and assets on your behalf. Similar to a Will, a Trust allows you to decide how your property should be inherited after you pass away. Beneficiaries can include your loved ones or even organizations you’d like to support.

A Trust is different from a Will because it becomes the legal owner of any assets or property you transfer into it. Because you’ve moved this property out of your personal estate, it doesn’t have to go through the probate process.

Note that there are several types of Trusts. Living Trusts are just one example, while there are also Revocable Trusts. Click here to read our guide that explains the difference in depth!

Why Is It Helpful to Have a Living Trust in the State of California?

So why is it helpful to have a Living Trust in the State of California, specifically? The main reason is the probate process. The State of California is infamous for having one of the nation’s longest and most expensive probate processes. This can be attributed to a few reasons.

First, California has high probate fees. The larger your estate, the more costly your probate. In California, the first $100,000 of an estate’s value is charged a 4 percent probate fee. Not to mention, both the estate attorney and the estate executor could charge the same fees. If you only have a Will, then your entire estate is subject to probate fees. In comparison, if you moved a significant number of assets into a Trust, your probate fee will be much lower. Probate fees eat into your beneficiaries’ inheritances, so this is certainly something to consider.

Second, California probate notoriously takes a long time. It typically takes at least 8 months but can take up to several years. These delays have only gotten more severe in correlation with IRS slowdowns and COVID-related court closures. 

 By setting up a Living Trust, you can offset these probate-related costs and delays by skipping the process altogether or limiting your estate’s exposure. If you want to ensure a shorter, smoother transition of your estate to your beneficiaries, a Trust is a great solution.

Do I Need a Living Trust in California?

A Living Trust is not a requirement in the state of California. However, if you are a California resident, setting up a Living Trust can offer many advantages. 

First and foremost, the California probate process is not as streamlined relative to other states that have adopted the Uniform Probate Code. Mentioned in the previous section, the probate process is particularly lengthy in California, not to mention the costs. 

Using a Living Trust allows you to slip the probate process or at least limit the number of assets and property that pass through it. A Living Trust may not be necessary if you have a small estate that meets the requirements to qualify for the simplified probate process. You can apply for this shortcut by filling out a Small Estate Affidavit

How to Create a Living Trust in the State of California

Creating a Living Trust in California comes with numerous advantages. Discussed extensively in this guide, the key advantage is skipping over the costly and lengthy probate process. The probate process is notoriously long in California, making the option of setting up a Living Trust even more attractive. 

Another advantage of utilizing a Living Trust over any other type of Trust is that you still get to manage and access Trust-owned property and assets during your lifetime (as if they were your own.) They would then pass to your beneficiaries after you pass away.

If you’re interested in setting up a Living Trust, you’ll need to know how. Here are the steps to setting up a Living Trust in California:

1. Take an inventory of your assets

When developing an estate plan, one of the first things you’ll want to do is take an inventory of your assets. Make a list that includes all of your assets, including real property and financial accounts. This will help you map out the size of your estate, and begin thinking about how you want to structure it. 

Next, decide which assets you want to transfer into your Living Trust. You’ll likely want to transfer assets such as your house(s), financial assets, and other valuable assets. It’s typically impractical to transfer assets that are easy to sell and depreciate in value. Also be careful not to transfer assets that would pass outside of the probate process regardless, such as retirement accounts or life insurance policies that already include beneficiary designations.

2. Select your trustee

Once you’ve inventoried your assets, it’s time to choose your trustee. Your trustee is the individual or entity that you name to act as the custodian of your Trust. Their responsibilities include managing assets held in the Trust, administering finances, and distributing assets per the instructions in the Trust.

Living Trusts are unique because you can select yourself as the trustee during your lifetime. This makes sense because you can more easily manage and use your own assets transferred into the Trust without having to go through a third party. However,  be careful to name your alternative trustee who will step into the role when you pass away. Learn more about selecting your trustee.

3. Designate your beneficiaries

Your beneficiaries are the individuals or organizations who will inherit assets from your Trust. When you pass away, your trustee will distribute these assets to your selected beneficiaries per your instructions. 

One of the many advantages associated with a Living Trust is having control over the timing and nature in which your assets are distributed. If you have a reason why you wouldn’t want certain assets passed automatically to a beneficiary, a Trust allows you to set up conditions.

4. Write up your Declaration of Trust

The next step is arguably the trickiest: drawing up your Declaration of Trust. This is because there is no standardized template to follow, but you need to ensure your language is legally correct and binding. Unless you’re an attorney, you will need assistance.

Hiring an estate planning attorney can be costly, but luckily there is an affordable alternative. Trust & Will offers affordable Trust creation solutions. Even better, it can all be completed online! Find out more about our comprehensive Trust plan here.

5. Sign your Trust in front of a Notary Public (optional)

The good news is you don’t need to get your Trust witnessed or notarized in order to make it valid. All you have to do is sign your Trust document and, voila, it’s all done! 

You may want to consider the optional step of signing your Trust in front of a notary public to have it notarized. This will authenticate your document and cut down the risk of having the validity of your document questioned later down the line.

6. Transfer assets and property to the Trust

Last but not least, make your Trust functional by transferring your assets into it! You will retitle your property so that it is under ownership of your trustee. Be prepared to bring your Trust and identification documents with you to your financial institutions to request the transfer of your assets.

Create Your Living Trust Today

The Trust creation process can feel abstract and unattainable to those completely new to the topic, but it’s not as complex as it seems! If anything, the vast number of advantages of creating a Living Trust California can serve as a strong motivator to learn the ropes and get help when needed.

California probate is notoriously lengthy and costly, making it a longer-than-necessary wait for your loved ones to inherit your estate. By transferring your assets into a Living Trust, you can help limit your exposure to probate or skip the process entirely. Even better, a Living Trust allows you to use and control assets during your lifetime. Just be careful to name your backup trustee who will take over when you pass away.

Setting up a Living Trust doesn’t have to be this complicated, expensive process as it's made out to be. At Trust & Will, we’ve worked hard to develop an accessible and affordable Trust product that can be completed through our online platform! Start your Trust online today!

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