Updated: August 24, 2018
Creating a living trust in California requires a variety of steps to design and execute the document. Once established, a living trust allows for the transfer of property after your death in a manner that avoids the time and expense of probate. A will is still necessary for certain cases, for instance naming a guardian if you have minor children. Setting up a living trust can help the beneficiaries of your estate save time and money.
Generally speaking, living trusts are revocable, allowing you to change them in any way you like while you are alive. The process of setting up a living trust is fairly easy. The main steps for doing so are outlined below:
Building your living trust
The first step is to decide the type of trust you will create. Married individuals should determine whether they want to set up an individual or joint trust.
If a trust is set up as an individual trust, it can only include your property; a joint or shared trust will include all property belonging to you and your spouse.
It is possible to set up an individual trust for both you and your spouse, however, this can create issues when it comes to shared assets. A joint trust, on the other hand, is able to handle both property that is shared and property that is individually owned.
List your assets
Remember that it is generally not necessary to place all the property you own in your trust.
Retirement or investment accounts allowing you to select a beneficiary should be left out of the trust; adding them or making the trust the beneficiary can unnecessarily complicate the distribution process with these types of accounts.
Assemble the necessary paperwork for your assets
This will enable you to provide accounts numbers and account data necessary to transfer the ownership of your assets to the name of the trust.
You should also verify that the information describing your property in the trust documents is accurate to prevent complications down the line.
Determine who will inherit the property in your trust
Those who you desire to inherit the assets in your trust should be named as beneficiaries of your trust. If you are naming children as beneficiaries, a trustee to manage the inherited property for them until they reach the age of majority should be named.
It may be advisable to name alternate beneficiaries in case the primary beneficiary or beneficiaries predeceases you or declines to accept the property in the trust.
Name a successor trustee
During your lifetime, you will serve as the trustee of the trust. Upon your death, a successor trustee must be designated for the purpose of distributing trust assets.
Many people select their spouse or an adult child to be their successor trustee. It may be wise to also nominate a back-up to handle successor trustee duties in the event of the incapacity or death of the primary successor trustee.
It’s a good idea to speak with your successor trustee prior to selecting them to make sure that they are interested in being trustee.
A bank or trust company can be selected as successor trustee, however, these entities will typically charge fees for the service.
Trusts are different than wills in that your successor trustee does not have to reside in the same state that you do or where property to be distributed is located. This allows for a wider candidate pool when it comes to selecting a trustee.
Drafting the trust documents
You may want to consult an attorney for this purpose. While it is possible to draw up a simple living trust yourself, if your trust will have a variety of provisions or if you have substantial or complex assets legal assistance can be valuable.
If you choose to draft the documents yourself, you can still take them to an attorney to review.
An attorney licensed to practice law in California can inform you if the trust documents you have used meet the criteria promulgated by the state for living trusts.
Give the trust a name
The first section of the trust includes your name and the trust’s name as well as the type of trust you will be creating.
List yourself as the grantor, as you will be creating the trust to govern the disposition of your property.
Specify the names and responsibilities of the trustee and successor trustee:
During your lifetime, you are the trustee of the living trust.
After your death, the successor trustee takes over and distributes your property to the beneficiaries as provided for in the trust.
While you are the trustee, you retain the same rights and powers to use, transfer, or dispose of your property as was the case before the creation of the trust.
The successor trustee is responsible for taking the necessary steps to report any income derived from the assets in the trust and making sure ownership of the property is transferred from the trust to the named beneficiaries.
Make a list of the trust’s beneficiaries
The beneficiaries will inherit the property in the trust upon your death. Property in the trust can be listed separately on your declaration or make a separate schedule of property that is referred to in the trust document.
Draw up a schedule of trust property
Use a separate document to list property and assets in your trust. This list can be attached as a schedule to your declaration of trust.
A separate document makes it easy to make amendments to it later without necessitating the execution of a complete declaration from scratch.
You have the ability to make changes to assets included in the trust at your discretion. To do so, simply update the schedule and make changes to the property ownership documents to reflect the change.
Execute the living trust
Once it has been drawn up the trust must be executed:
Sign the trust: A declaration of trust must usually be signed before a notary. It may be wise to have more than one copy of the signed and notarized trust in order to have multiple originals. This enables you to provide another original copy to the person serving as your successor trustee.
Record or File Trust Documents: Generally, trusts aren’t required by law to be recorded or filed with a government entity such as a court.
It is important to keep your trust documents safe after you have executed the documents:
A home safe or a safe deposit box at a bank or other secure facility can be used to store the documents.
Provide a copy to the successor trustee so he or she can review the documents and act on them when necessary.
Trusts are different from wills in that they are not required to be filed with a court, so no public record of them is created. This makes them a preferred method for those who wish to preserve their privacy.
Transfer the title of property to the trust
To finalize the trust you must transfer ownership of the assets in the trust into the trust’s name.
The new title of the property will typically indicate that it is owned by the trust and include your name as the owner or trustee of the trust. If you have real property in the trust, a new deed must be executed including the trustee language. When signing documents make sure to use “trustee” after your signature.
Submit an Application for an EIN (Employer Identification Number)
An EIN is needed to file trust tax returns. While you aren’t required by the IRS to file a separate tax return on behalf of the fund during your lifetime, the filing of a tax return might be necessary after your death if the trust contains income earning assets.
To save your successor trustee the time and trouble of applying for an EIN after your death you may want to apply for one when you set up the trust.
You can do so online by clicking here.
Call us for a free consultation
If you or a loved one needs help setting up an estate plan to avoid some of these issues, call Amity Law Group today at (626) 307-2800 for a free consultation with our experienced estate planning lawyers. We serve clients throughout Southern California, including Los Angeles, Pasadena, Arcadia, San Gabriel, and Rosemead.