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What is a California Living Trust & why do I need one?
A California Living Trust is a legal document that replaces what most people think of, when they think of a Last Will & Testament. In other words, a living trust makes sure your assets go to the people you choose. In practice, to establish a living trust, a Trustor (who is the person who creates the trust) signs a document called a Declaration of Trust, usually naming him or herself as Trustee of that Trust. At the same time, the Trustor transfers his or her assets to the trust. Transferring assets into the trust is known as funding the trust. When properly funded, a CA revocable living trust enables an estate to avoid probate upon death. A living trust also avoids a second probate for your spouse or partner when he or she passes away, and if you hold property in other states, it avoids a probate there as well.
Besides avoiding a California probate, living trusts (when properly drafted) help people obtain asset protection for their loved ones, while ensuring a smooth transition of assets from you to the next generation. Plus, distributions to your children may be set up in a way that provides for their health care, education, support, and maintenance after you are gone, without them having the ability to inappropriately waste family assets. So for example, most people dread the idea of their kids blowing the inherited money in Vegas or on a new Ferrari or in some other frivolous manner. In fact, parents often even opt to set up a California living trust which gives their children the bulk of the family estate only once they have reached an appropriate age, such as 30 years old.
You may be wondering how your life changes after you create and fund your CA living trust?
As a practical matter, owning your assets in the name of your CA revocable living trust does not change anything for you. And contrary to what many people believe, a revocable living trust does not provide you with creditor protection or income tax savings. (Please read about our irrevocable trusts, if your desire is to obtain creditor protection or income tax savings.) With a living trust, it is really only after you become incapacitated or pass away that your successor trustee steps in to carry out your wishes-which avoids a costly court probate and/or conservatorship proceeding. If you are unable to act, your successor trustee will make distributions for your benefit and after you are gone, your successor trustee distributes your estate to your beneficiaries in accordance with the specific terms of your California Revocable Living Trust.