The great advantage of a California revocable living trust is found in the term "revocable." This is one estate planning tool that an individual can use without locking themselves in forever. A new marriage? A new grandchild? A need for the assets? The person making the trust is free to change it to suit their current circumstances and to revoke it for any reason or none.
What Is a Revocable Trust?
A trust is a vehicle for transferring assets. Generally a trust agreement involves three roles: the grantor or settlor who funds the trust with their assets; the trustee who holds the assets for one or more beneficiaries; and the trust's beneficiary or beneficiaries to whom the assets of the trust are transferred. In an irrevocable trust, these three roles are usually held by different people or entities. In a California revocable living trust, they are often held by the same person.
A revocable living trust in California is a legal vehicle that allows a grantor to transfer ownership of assets into a trust. The trust is managed by the trustee, who is usually the grantor, for the benefit of a beneficiary, who, typically, is also the grantor. That means that a grantor can transfer assets to a trust they themselves manage for their own benefit. The grantor may, at any time and for any reason, amend or dissolve the trust.
Benefits of a California Living Trust
Why would a grantor go through the trouble of setting up a trust they manage for their own benefit? Transferring property ownership from an individual to a trust they control does not protect it from creditors or create significant estate tax advantages in California. It does, however, allow the grantor's heirs or loved ones to avoid the probate process after the grantor dies.
The grantor names a successor trustee and a beneficiary or beneficiaries who will take the property when the grantor dies. At that time, the property passes outside of a probate proceeding, avoiding the expense and delay probate involves.
Setting Up an Intervivos or Living Trust
Setting up a revocable living trust in California is not difficult. Forms to do so are available online or from a law office. Instructions often are included with the form, but it is also possible to buy a pamphlet or book detailing options for this type of document. A form must be filled out creating the trust, then the trust assets must be transferred to show trust ownership rather than personal ownership.
The cost of putting together a revocable living trust in California is quite low if an individual creates their own document, but may be expensive if they turn to an estate planning attorney. Those acting on their own won't pay much for an online form and guide, but there is always the risk of making a mistake.
Those who turn to a legal professional avoid the do-it-yourself risks but must pay to do so. The legal fees will depend upon whether the attorney offers a set fee for the trust or charges by the hour, which is more typical. Hourly fees in California vary from law firm to law firm, and attorneys in the more urban areas often have higher hourly rates than those in rural areas. It could cost more than $1,000 to set up a revocable living trust in California.
When to Dissolve a Living Trust
A grantor can dissolve a revocable living trust in California for any reason or no reason at all. They retain complete authority over the trust and can add assets, remove assets or terminate the trust for good reason or on a whim. Nobody can require a grantor to explain why they are terminating a living trust.
Generally, circumstances change over time and changed circumstances may make the idea of the living trust less attractive. For example, a divorce, a new marriage, changes in a descendant's personal circumstances or a financial alteration in the estate of the grantor are all common reasons to dissolve a living trust.
When a grantor dissolves a living trust, the only current change is that they once again will hold the property that had been in the trust in their own name individually rather than as trustee for the trust. The future consequences are more dramatic: the person or persons named as successor beneficiaries will no longer take ownership of the property on the grantor's death. Rather, the property will be part of their estate and pass to the family members or persons named as beneficiaries in their will as the will is probated.
How to Dissolve a Living Trust
Most living trusts do not specify a procedure for terminating them. If one is described in the trust document, that procedure must be followed. Otherwise, dissolving a living trust involves steps that are opposite to creating one, and the court will not be involved. Instead of filling out a form to create the trust, the grantor fills out a revocation form expressing their desire to dissolve the trust.
Revocable living trusts require no specific dissolution form under California law, so a simple statement is enough, naming the trust and specifying the date of dissolution. It need not be notarized. If there are more than one grantor, all must sign.
If the grantor was also named as the trustee and the beneficiary of the property, they should simply retain a copy of the revocation for their records. If other people were named in these roles, they should be provided a copy of the dissolution form. Likewise, if financial institutions have an interest in the trust property, for example, if the real property held by the trust has a bank mortgage on it, the financial institution should also be copied.
Transferring Ownership to the Grantor
To create a living trust, the grantor originally transferred ownership from their own name, holding the property individually, to themselves as trustee of the trust. To dissolve the living trust, they must, as trustee, transfer the ownership interest back to themselves as an individual.
Under California state law, this involves creating legal documents to transfer ownership. If there are vehicles or real property in the trust, the grantor must change the titles on the vehicles and transfer real estate ownership by deed to reflect that the grantor now owns the property individually rather than as trustee. Copies of the real estate deeds should be recorded appropriately in the same recorder's office the deed transferring property to the trust was recorded.
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.