Setting Up a California Living Trust
A living trust can be an important part – in many cases, the most important part – of a person’s estate plan. Not everyone, however, may need a living trust. The greater the risk of incapacity or death, the greater the need for a living trust. The greater the value of your assets, particularly if they include real estate, the greater the need for a living trust.
A young, healthy person with few assets probably does not need a living trust right now. An individual or real estate investor who is often buying, selling, or refinancing his or her real estate holdings want not a living trust to hold those assets. On the other hand, many people recognize that a living trust will be helpful in the future, and so they set up a living trust ahead of time to have it in place in the event of an accident or sudden illness.
When a living trust has been properly established and an individual has put their assets in the trust, the living trust will enable the estate to avoid probate in California. A living trust will also avoid the necessity of a court conservatorship should an individual who has established a trust become incapacitated. There are many benefits of having a revocable living trust, and this estate planning tool should be considered by individuals and couples who own real property or whose assets exceed $166,250.
How to Create a Living Trust Without an Attorney
Creating a living trust is typically uncomplicated. Therefore, it’s a process that you can complete on your own if you have few assets and are not providing for guardianship of minor children. That said, you should be thorough with listing your property and selecting your trustee before you start. Then, once you have an inventory of your assets, you can create your trust document.
Within your living trust, you should specify the exact property to be held, your appointed trustee, and your beneficiary. While seemingly simple, the court will rely on this document when interpreting any issues with your estate following your death. Therefore, it is important to ensure it conforms to California’s legal requirements.
After you have created your trust document, you must sign it in front of a notary public. Then, you will transfer the legal title to the trust property to the trustee to hold for the beneficiary. Remember: this legal transfer is required; otherwise, the trustee has no power. Also, consider designating a successor trustee to take over in the case of the trustee’s death or incapacity.
If you would like assistance creating or reviewing your trust document, you can contact A People’s Choice for high quality non-attorney assistance. We can help you create a trust that is simple yet legally adequate to protect your estate.
Nuts and Bolts of Setting Up a California Living Trust
Trusts are usually revocable, which means that the person establishing the trust can make changes to the trust at any time as long as they are competent to do so. In most situations, the person establishing the trust is the Trustee – the person who manages the trust. The trust also names a successor trustee. If the person establishing the trust should become incapacitated or disabled, the trust is in place to manage his or her financial affairs, and the successor trustee can then take over the management of the trust. A living trust is not subject to probate.
The three basic types of revocable living trusts include:
- A probate-avoidance trust for an individual;
- A probate-avoidance trust for a couple who own property together; and
- A probate-avoidance and estate tax-saving AB trust for prosperous couples, typically couples with a net combined estate worth over $1.5 million.
No law specifies the form a living trust must take. Some attorney-created forms contain vast amounts of legal words, which serve little real-world purpose except to generate attorney’s fees.
Your loved one will have no control over the money; as a result, SSI and Medicaid administrators will ignore the trust property for program eligibility purposes. The trustee can’t give money directly to your loved one, but can spend trust assets to buy a variety of goods and services for your loved one such as personal care attendants, out-of-pocket medical and dental expenses, physical rehabilitation, education, home furnishings, vacations, recreation, vehicles, and other incidentals.
Sometimes clients find the words and terminology used in their estate documents to be a little confusing. This blog article covers common terms used in wills and trust and will help you understand the meanings of words you may see in estate planning documents. We also have many other articles on our website covering living trusts, including this convenient California living trust checklist. To download a booklet published by the California State Bar on Trusts, click here.
Should I Make a California Living Trust?
Many individuals choose to create a living trust so their estate can avoid probate upon their death. Oftentimes, probate is an expensive and complicated process that your family has to take care of after you pass. Plus, if you create a living trust, you can make it revocable. In other words, you have the option to change or terminate it at any time before you die.
That said, some people need a living trust more than others. For example, if a married couple without children wishes to be each other’s sole heirs, they will probably not require a living trust. However, if a couple has children, they should have a living trust. This document will allow them to pass on their estate to their children in a simpler manner.
Keep in mind that in California, if your estate is worth $166,250 or less, you will not need a living trust to save on probate. Instead, state law allows for a simplified probate for smaller estates. On the other hand, you may choose to create a will even if you have a valid living trust. Within your will, you can write a provision that allows for any property not identified in the trust to be transferred to it upon your death. Ultimately, you should take all steps possible to simplify your estate planning.