A living trust can be a useful tool when planning your estate. But if you live in California and are considering using a living trust to protect your assets during your golden years, make sure you understand the state and federal rules that surround them. Of course, whether you’re setting up a living trust, planning for retirement or seeking help with general financial planning, it might make sense to find a financial advisor in your area.
- 1 How to Create a Living Trust in California
- 2 How Much Does It Cost to Create Living Trusts in California?
- 3 Why Get Living Trusts in California?
- 4 Who Should Get Living Trusts in California?
- 5 Living Trusts vs. Wills
- 6 Living Trusts and Taxes in California
- 7 Bottom Line
- 8 Estate Planning Tips
- 9 Don’t yet have a living trust?
How to Create a Living Trust in California
Creating living trusts in the Golden State requires a number of steps. Here’s what you’ll need to do:
- Pick a type of living trust: If you’re married, you’ll first need to decide whether you want a single or joint trust. A joint trust will allow you to include property that each spouse owns separately as well as joint property.
- Take stock of your property: You’ll also need to decide what you want to be in your trust at this point. Gather the corresponding paperwork for your property, including certificates of stock ownership, titles to automobiles and other vehicles and records of homeownership.
- Choose a trustee: This could be you or another person. The trustee manages the assets in the trust. If you name yourself as trustee, make sure to name a successor trustee to take over after you die or in the event you become incapacitated and can no longer oversee your own affairs. You should also choose beneficiaries, which are the people or organizations who will inherit the property in the trust. The trustee or successor trustee is responsible for ensuring that assets go to the beneficiaries as the trust directs.
- Draw up the trust document: There is no single form that you have to use in California to do this, but there are some options. If you’re confident in your abilities, you can download a program online to help you write a document. Otherwise, you’ll want to get the help of either a lawyer or a financial advisor.
- Sign the trust: You must complete this step in the presence of a notary public.
- Transfer your property to the trust: This is known as “funding the trust” and is crucial to do — otherwise, the trust will be empty when it’s passed on to your successor trustee. This requires some paperwork, but an attorney can likely help you.
See also: What to Know About Living Trusts
How Much Does It Cost to Create Living Trusts in California?
The cost of creating living trusts in California depends on which method you use. If you do it yourself by buying a book or an online guide, it will likely cost less than $100. However, there are pitfalls to DIY estate planning. The downside of working with a professional, however, is the cost. If you choose to use an attorney to help you draft your trust documents, it could cost more than $1,000. Each attorney sets his or her own fees, so consult with your attorney to get an estimate.
If you choose to find a lawyer, make sure it is an attorney who specializes in trusts, not simply one who does estate planning, as this might mean he or she only does wills and probates. The California Bar Association has a certification for the legal specialty in estate planning, trust and probate laws, so you might consider finding an attorney with that specialization.
Why Get Living Trusts in California?
There are a number of reasons to get a living trust. One of the key reasons is that it allows your heirs to avoid going through the probate process when you die. Probate court is a potentially time-consuming process through which an estate is processed after a person dies. Creating living trusts allow your family to avoid this potentially irritating endeavor.
Californians have an especially good reason to get living trusts, as the state does not use the Uniform Probate Code. In other states, this code simplifies the process for estates going through the probate court. Since it isn’t in effect in California, having a living trust is especially important if you want to make life easier for your heirs in the Golden State.
A living trust can also be very useful if you are leaving property to a minor child. If you designate another trustee for the property, he or she can hold it in the trust until the child reaches age 18 or 21.
Finally, establishing a living trust means you won’t have to have a conservatorship placed on your assets in the event you become incapacitated. With a living trust, you’ll already have established a trustee to administer your assets.
Who Should Get Living Trusts in California?
While a living trust isn’t only for the rich, the amount of property and assets that a person has is an important part of determining if you should get a living trust. A living trust may be especially beneficial for larger estates though, as they tend to be more complex.
There are downsides to creating a living trust, though. They can be more difficult and time-consuming to arrange, and they may be more expensive. If your inheritance plan is fairly simple, a will may be sufficient, even if it does mean an inconvenient probate experience in California.
Living Trusts vs. Wills
If you decide to get living trusts, keep in mind that you will likely still need a will. There is always a chance that some piece of property or an asset won’t end up in the living trust. A will can provide direction on what to do with property that’s not included in the living trust.
Neither of these are the same as a living will, though. Instead, this document dictates what medical action should be taken if you become incapacitated.
There are a few more elements that wills can handle that trusts cannot. These include:
- Naming an executor
- Establishing guardianship for children
- Leaving instructions for paying taxes and debts
- Naming managers for children’s property
A will is also simpler to create, but it does require witnesses. The chart below summarizes some the similarities and differences between a living trust and a will.
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in California
Living trusts will likely not have a huge impact on your taxes in California. That said, if you’re thinking about legacy planning you should know about the California estate tax and the California inheritance tax so that you know everything that may happen to your estate after you die.
At the state level, there is no estate tax or inheritance tax in California. But as of 2020, any estate worth more than $11.58 million ($23.16 million for couples) may owe a federal estate tax regardless of whether you use a living trust or not.
Creating living trusts in California is not a terribly difficult process, but it does take some planning. You might find it helpful to work with a financial advisor or another professional when drafting up your living trust. However, you can also download the forms online and then take them to a notary public yourself. Additionally, a living trust does not replace a will, but it can supplement it to make life easier for your heirs after you die.
Estate Planning Tips
- Whether you’re creating a trust or a financial plan, it might make sense to hire a financial advisor. SmartAsset’s free matching tool only takes five minutes to pair you with up to three financial advisor options in your area. If you’re interested in putting together an estate plan, get started now.
- A common misconception is that estate planning is only for rich and old people. In reality, you should come up with a plan for your estate regardless of your financial situation. Even if you hope to have years to live, it’s important to establish an estate plan in case something happens.
Don’t yet have a living trust?
Need to make amendments to your living trusts or want to revoke it? Consult an estate planning attorney to advise you as to which option is best for your situation. And, if you don’t already have a living trust, a New Year’s resolution for 2021 should be to create one.
At the Lynx Legal Service, we specialize in creating living trusts as part of a comprehensive estate plan. Call 888-441-2355 or contact us online for a free consultation with our experienced attorney.