What You Need to Know About DIY Living Trusts in California
What is a living trust?
A living trust, like a will, is a legal document allowing one to disperse their assets to people and organizations after passing away. A living trust “owns” the property placed in it while allowing the creator (trustor) control over it. As long as the assets have worth, trustors can place them into a living trust. One may, for example, list their home, bank accounts, jewels, and stocks. One can also use a living trust to designate a custodian to manage gifts left to minor children or establish provisions for pet care after their death.
How do wills and living trust differ?
Unlike those held in wills, assets maintained under living trusts do not need to pass through probate before dispersing to beneficiaries, those the trustor/settlor has selected to receive their assets. Taking this route will save surviving recipients time and money during a potentially lengthy, expensive, and public process.
Steps to Making a Living Trust in California
1. Review all assets.
Make a list of all your assets, including physical and financial property.
- Property to include in a trust:
- Real estate (like your house)
- Bank and brokerage accounts
- Other valuable assets, like expensive jewelry or artwork
One should not transfer certain assets into a trust, including:
Vehicles: automobiles, boats, and campers.
Related: Is California a Community Property State?
These vehicles degrade in value, and people regularly buy and sell them, making them difficult to pass down.
Life insurance policies and retirement funds (401(k)s and IRAs) are examples of non-probate assets.
Non-probate assets can already pass to beneficiaries without probate if one has properly selected them, thus eliminating the need for life insurance policies in a trust.
2. Choose a trustee.
A trustee manages a trust’s assets. Many people opt to appoint themselves as trustees of a revocable living trust. One should also name a successor trustee in the trust document because the successor trustee will manage the trust assets if the trustor dies or becomes incapacitated.
3. Designate beneficiaries.
The people or organizations one chooses to receive assets in a trust are beneficiaries. One’s replacement trustee will transfer the trust assets to designated beneficiaries and close the trust when the trustor passes away.
For each of the trust’s assets, one can name a beneficiary. A trustor can even designate a charitable organization as a recipient. Simply include the charity’s full name, company address, and EIN (Employee Identification Number) (EIN). A short internet search or a search of the IRS’s Tax Exempt Organization Search database can help you identify a charity’s EIN.
4. Draw up a Declaration of Trust.
In California, no standardized Declaration of Trust document exists. California considers one’s document valid if it has the correct legal language and is properly executed.
In California, individuals can create the following living trust documents:
- Use a web-based platform. One may fill out and print a California living trust form from a variety of internet providers.
- Employ an estate attorney to draft the trust’s documentation.
This method will be more expensive than establishing a DIY trust. However, if one has a complicated estate, it may be beneficial to hire an attorney to draft a tailored plan. Trustors can also save money by preparing their plans ahead of time.
Related: Quasi-Community Property in California
5. Sign your trust and notarize it.
To make your trust valid in California, all one needs to do is sign the trust document. To be valid, another person must witness and notarize the document. Many people, however, prefer to sign their paper in front of a notary public to help validate it.
Trustors can find notaries in various places, including banks, libraries, legal and accounting offices, and even your neighborhood print shop. Trustors can phone your preferred location to find out what hours their notary is available, make an appointment, or walk-in.
6. Transfer property to the trust.
Trustors must transfer property ownership to this legal body after signing the trust document. On the new deed or title, trustors should name their trustees as property owners. Even if the trustor is also the trustee, they must update their deeds and titles to reflect their role as trustee.
Let’s imagine one needs to update their house deed so they, the trustee, are listed as the owner. The revised deed should state “John Smith, Trustee of the John Smith Revocable Trust” instead of “John Smith.”
One’s trust must contain their property to function properly. As trustors accumulate new assets throughout their life, they should transfer the assets/property into the trust.
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