To make a living trust in California, the settlor must properly manifest an intention to create a trust and use one of the methods the California Probate Code recognizes, such as a declaration of trust or a transfer of property to a trustee. Signing the trust is only the start; you still need to retitle your assets into it.
Key Takeaways
- California trusts are governed by the Probate Code, Division 9, Trust Law.
- California recognizes several methods of creating a trust, including a declaration by the owner that they hold property as trustee, and a transfer of property to another as trustee.
- A trust is only created if the settlor properly manifests an intention to create it, not just a general wish to benefit someone.
- Funding, retitling real estate and accounts into the trust, is what actually delivers probate avoidance in California.
What Does California Law Require to Create a Living Trust?
Under California Probate Code Section 15200, a trust may be created by a declaration by the owner of property that the owner holds the property as trustee, a transfer of property by the owner during life to another person as trustee, a transfer by will or other instrument taking effect at death, an exercise of a power of appointment in favor of a trustee, or an enforceable promise to create a trust. Alongside this, Probate Code Section 15201 requires that the settlor properly manifest an intention to create the trust, regardless of which method is used.
Step-by-Step: Creating a Living Trust in California
- Decide on a revocable living trust if avoiding California's often lengthy and costly probate process is a priority, which it is for most California homeowners given the state's high property values.
- Name yourself as initial trustee if you want to retain full control, and name at least one successor trustee.
- Draft the trust instrument in writing, clearly manifesting your intent to create the trust and identifying your beneficiaries.
- Sign the trust document.
- Fund the trust by retitling assets, starting with California real estate, into the trust's name.
- Record a new deed transferring your California real property from your individual name to yourself as trustee of the trust.
Why Does Probate Avoidance Matter So Much in California?
California's probate process calculates attorney and executor fees as a percentage of the gross value of the estate, not the net value after debts, which means even a modestly leveraged home can generate substantial statutory fees given California's high real estate values. This fee structure, combined with California probate's typical timeline of a year or more, is the single biggest reason California residents pursue living trusts more aggressively than residents of many other states.
How Do You Fund a California Living Trust?
Funding is the step that actually avoids probate, separate from signing the trust document. For California real estate, this means a new deed recorded with the county recorder in the county where the property sits. For bank and brokerage accounts, contact each institution directly to retitle the account in the trust's name. See our national guide on how to fund a trust for the process asset by asset.
Does a Living Trust Avoid Probate in California?
Yes, for assets properly titled in the trust's name. Because California's statutory probate fees are based on gross estate value, a funded trust can save a family a meaningful amount of money in addition to avoiding the time delay and public court record. See how long does probate take in California to understand the process a trust actually helps you skip.
What About Community Property in California?
California is a community property state, meaning most assets acquired by either spouse during the marriage are generally owned equally by both. Married Californians setting up a living trust often use a joint trust that holds community property together, with clear language preserving the community property character of the assets rather than accidentally converting them to separate property through the transfer. This distinction matters for tax basis purposes at the death of the first spouse, so it is worth being deliberate about how the trust describes and holds community versus separate property.
Common Mistakes Californians Make With Living Trusts
- Signing the trust but never recording a new deed for the family home, leaving it exposed to probate.
- Not updating the trust after refinancing, since some lenders require the property to be transferred back to the individual owner's name temporarily during the loan process and then it is not always transferred back into the trust afterward.
- Naming a successor trustee without confirming they are willing and able to handle the responsibility.
- Forgetting to fund newly purchased property, such as a vacation home, into the trust after the original trust was signed.
Do You Still Need a Will in California If You Have a Trust?
Yes. Most Californians with a living trust still sign a pour-over will to catch any asset never retitled into the trust and to name guardians for minor children, which a trust cannot do. See how to make a DIY will in California for the state's specific will execution requirements.
Should Your California Trust Be Revocable or Irrevocable?
Most Californians setting up a living trust for probate avoidance and incapacity planning choose a revocable trust, since it preserves full control and flexibility. An irrevocable trust serves a different purpose, generally used for Medicaid planning, asset protection from creditors, or removing assets from a taxable estate, and it requires giving up control permanently once signed. See our national comparison of revocable versus irrevocable trusts if you are unsure which structure fits your situation.
For the underlying concept behind this structure, see our national guide on what is a living trust, and see the full picture of your options at estate planning in California.
FastWill's trust package is built to meet California's trust creation requirements and includes funding guidance for California real estate and accounts.
Frequently Asked Questions
Does a California living trust need to be notarized?
California's trust creation statutes do not impose a blanket notarization requirement on the trust instrument itself, but a deed transferring California real estate into the trust needs to meet the state's standard deed execution and recording requirements, which include notarized acknowledgment.
Can I be my own trustee of my California living trust?
Yes, most people serve as their own trustee while alive and competent, naming a successor trustee to take over upon incapacity or death.
Why do so many California residents use living trusts compared to other states?
California's probate fees are calculated as a percentage of the gross estate value, which can be significant given the state's high property values, making trust-based probate avoidance especially valuable for California homeowners.
What happens to property I forget to put in my California trust?
It remains in your individual name and typically goes through probate, often caught eventually by a pour-over will that directs it into the trust afterward.
Does a living trust protect my California home from creditors?
A revocable living trust generally does not protect assets from your own creditors while you are alive, since you retain full control and can revoke the trust. Creditor protection typically requires irrevocable trust planning instead.
Do I need to redo my California trust after refinancing my home?
Some lenders require the property to be moved out of the trust and back into your individual name temporarily during a refinance. If that happens, confirm the new deed transfers the property back into the trust once the refinance closes, since this step is commonly overlooked.
