A trust is a legal vehicle that holds assets on behalf of a beneficiary or beneficiaries.
There are various kinds of trusts including some that are made during the lifetime of the person providing assets, some coming into existence after a person's death, some revocable and some irrevocable. While some types of trusts are helpful in reducing taxes, the main purpose of a California revocable living trust is to avoid a lengthy probate proceeding.
Living Trusts in California
A trust is an asset-holding arrangement whereby a grantor, or settler, funds the trust. A party called the trustee holds title to the property for the benefit of the trust beneficiaries.
A living trust is a trust set up during the lifetime of the grantor as opposed to after his death. It is sometimes called an intervivos trust, a Latin phrase meaning between living persons.
If a person makes a living trust in California, he is the grantor, but he can serve as the trustee as well. That means that he can hold title to the trust property during his lifetime. The grantor names the beneficiaries for his living trust and these are the people who receive the property when he dies.
Read More: Questions About Revocable Living Trusts in California
Revocable vs. Irrevocable Living Trust
A person wishing to set up a living trust in California can opt for either a revocable living trust or an irrevocable living trust. Both are made during the lifetime of the person providing trust assets but there is an important difference: a grantor retains total control if she sets up a California revocable living trust since she can change her mind at any time. The trust is revocable, meaning she can modify it or revoke it during her lifetime.
In contrast, once a person signs an irrevocable trust, she gives up ownership and control of the property. She cannot either change the trust or eliminate it. Irrevocable trusts can be good tools for reducing taxes, and can protect assets from creditors but that comes at a cost: loss of control of the property.
Benefits of a Revocable Living Trust in California
A revocable living trust is not considered a gift until the grantor dies. That is because he can change his mind about it at any time, removing assets from the trust or changing beneficiaries. For that reason, it is not a very efficient tax avoidance tool.
Why do people make revocable living trusts in California? Some people like these trusts since they remain private, not available for review by the public. But the big advantage of making a living trust is to avoid lengthy probate proceedings.
Since California has not enacted the simplified procedures of the Uniform Probate Code, probate can be lengthy and complex. However, simplified probate proceedings are available for estates valued under $150,000 and real estate worth less than $50,000. So before a person rushes out to make a revocable living trust, he should see if either of these would apply to his estate.
DIY Living Trust in California
Can a person living in California create her own living trust document? Some people do. It's not hard to find a California revocable living trust form on the internet. But it's not necessarily a great idea.
Talking to an attorney who specializes in estate planning gives a person a broader view of the subject. The attorney can help evaluate his client's holdings, estimate the cost and timing of probate and advise his client on the wisest course to take, given her situation.