California Trust Attorney – Three Things You Should Know About a Trust
State Bar Certified Specialist in Tax Law
by Michael Hackman
818.907.3279
What is a trust and how does it differ from a will? Before planning your California trust you should know three important things:
1. A Trust Defined
A trust provides for the allocation of assets when you and/or you and your partner or spouse passes away. (Your California trust can be yours alone, or set up for both you and your significant other.)
By creating, and placing one’s assets in the trust (“funding” a trust), you ensure your assets are collected, managed and transferred according to your terms, without the hassle and expense of a probate process.
2. A Trust Administered
If you pass away with a California trust, you named a successor trustee to manage your assets upon your death. If you were married when you passed, your surviving spouse is generally the successor trustee.
If you create a trust with a spouse or partner, allocations are often made of certain assets into separate “sub-trusts,” which are managed or administered separately. Even if the survivor is the lifetime beneficiary, separate management of each sub-trust is required, as each sub-trust has its own rules for management and distribution. The subtrusts are often created for tax reasons.
Upon the first to die, title should be changed on assets to reflect the decedent’s death. A good trust attorney can best help you figure out which assets should be assigned to which sub-trusts.
3. Probate Avoided
For California trust assets to avoid probate, you should ensure your assets were actually transferred to the trust before you pass away. However, merely creating a trust won’t accomplish your goals and may saddle your family with years of expense during a probate process.
To avoid this, you should execute documents assigning your assets to the trust or re-title certain assets (e.g., transferring real property to the trust by deed). Have your trust attorney review your title to assets and the assignment document(s), to help you determine which assets to hold in trust.
Even if you have a valid trust, some assets may still be probated if not transferred to the California trust during your lifetime. But in California, a successor trustee may use a simple non-probate process to transfer some assets to the trust after the decedent’s death if the aggregate gross value of such otherwise probatable assets is under $100,000.
The state also permits courts to order that assets be added to trusts after death under certain circumstances. See your California trust attorney for more information.
California Trust, Will and Probate
Trust administration can be a lengthy process, depending on the terms of the trust. Many plans provide periodic distributions to your children or other beneficiaries until your beneficiaries reach certain ages (wills, of course, can also establish similar trusts for beneficiaries).
For more information about wills and probate, please see my colleague, Robert Hull’s blog “Will and Probate Explained – Why You Should be Prepared”.
Michael Hackman is a California trust attorney and a Certified Tax Specialist as specified by the State Bar of California’s Board of Legal Specializations program. Mr. Hackman Chairs our Tax and Estate Planning Practice Group and can be reached at 818.990.2120.