How to Make a Living Trust in California
If you’re interested in planning for the future, you may want to consider setting up a living trust. This process can quickly become complicated, so we thought we would provide some help. Here’s how to make a living trust in California.
How to Make a Living Trust in California
Living trusts serve a very important function in the estate planning process: they allow you to protect and benefit from, your own assets until the day you die. Once you pass on, any assets within the trust are handed down to a beneficiary of your choosing.
Because living trusts allow you to essentially bypass the probate system, they are especially important for anyone handing down a considerable amount of wealth. However, nearly anyone who wants to protect their assets can benefit from a living trust, even if the amount of included wealth is small.
Unfortunately, the process of creating a living trust in California is rarely ever easy or straightforward. You need to understand the legal requirements and official process in order to ensure that your irrevocable or revocable living trust endures.
Here’s how to set up a living trust in 7 steps…
1. Single Trust or Joint Trust
In the State of California, married couples can choose to enact a single trust (containing only assets belonging to one person) or a joint trust (containing assets legally defined as belonging to both parties).
You should discuss this consideration between yourselves first.
Which you choose will depend on your circumstances and your personal preferences, both individually and as a couple.
2. Taking Stock of your Assets
Regardless of your marital status, the next step is always to fully catalog your assets and any property you hold. Secure proof of ownership for as many of the items as you can (e.g., the deed to your house, vehicle titles, wills, or bank account statements). You may wish to work with an accountant on this step for ease of collection, especially if you’re cataloging a significant amount of assets.
Once you have a full list of your property in front of you, decide which items you wish to include in your living trust. You have the option to include as few or as many assets as is desired; feel free to choose a property based on personal preferences.
3. Nominate a Trustee
California law stipulates that all living trusts must be overseen by a trustee – that’s an individual (you or someone else) who manages the included assets.
The trustees’ job may be simple (such as when the included asset is something simple, like a vehicle or boat) or complex (such as when the included asset needs hands-on management; e.g, stocks, bonds, and investment accounts). They are also responsible for distributing assets to beneficiaries according to the trust.
You can serve as the trustee for as long as you are alive. However, it should be noted that it is always wise to nominate a successor trustee if you choose to step into the role on your own. This individual will supersede you in the event you become incapacitated, if you die, or if you are otherwise unable to manage the trust.
Options for trustee management, should you have no desire to serve in the role yourself, including a lawyer, a family member, a friend, or an accountant. Whoever you choose, it should be someone you can implicitly trust.
4. Choose the Beneficiary
The next step in creating a trust is to select your beneficiary or beneficiaries.
A beneficiary is a person, or persons, to whom you want the trust to payout at a certain point in time (e.g., upon your death). In many cases, this will be a child, a spouse, a family member, or a friend.
Some people also choose to assign a charitable organization as their beneficiary as a “final act of good” after they pass on.
5. Create a Trust Document
Once you arrange your assets, assign a trustee, and identify your beneficiaries, it’s time to create your official living trust document.
Trust documents, and what type of information they contain, are not absolute; they differ depending on the nature of your trust and the included assets. There are also differences between documents for irrevocable and revocable living trusts.
If you feel confident in doing so, you can handle this step from home on your own using online forms. However, doing so is rarely wise. Not only do these documents sometimes leave out critical information, but they can also put you at risk for lawsuits or trust failure in certain circumstances. It’s always better to work with an expert.
6. Make Your Trust Document Official
This is where an experienced estate planning attorney makes all the difference.
Trust documents are not considered official until they are signed in the presence of a notary public. In California, a Notary Public is defined as an individual approved by the state government to serve as an official witness with integrity and lack of bias.
Fortunately, Notary Publics are extremely common. Nearly all lawyers, attorneys, financial advisors, and other legal experts hold notary status. Doctors, courthouse workers, clerks, paralegals, and other local professionals who work in adjunct to the law may also qualify.
In most cases, your own lawyer will be able to serve as a notary for your trust document in addition to aiding you with its creation. Whoever you choose, they will sign and stamp your document with the official notary seal.
Related: Find a Lawyer through the SFVBA
7. Finalize Your Trust by Transferring Assets In
After you sign your trust document, you have the responsibility of officially funding the trust. In most cases, this will involve transferring ownership of the asset (e.g., bank account, money, stock, bond, or title) out of your name and into the trust.
The exact process can be dramatically different based on the requirements of your trust.
Conclusion
Now that you know how to set up a living trust in California, you can move forward with confidence and develop a plan for the future.
It is important to note that there are no legal requirements stating you have to fund your trust right away. You may choose to do so now, six months from now, or a year from now. However, it’s usually best to handle this right away. The more you know about creating a living trust in California, the more prepared you will be for the future. Failing to transfer ownership can lead to problems, should you pass away or become incapacitated; your beneficiary will have no legal claim to your assets.
You work hard for your assets – why not give yourself the option to ensure they wind up in the right hands?
Talk to an attorney who specializes in trust law today and enjoy peace of mind for life.
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