Funding your California Living Trust: A Step-by-Step Guide

A living trust and a will are similar in that both are legal documents that explain how you want your assets distributed after your death. However, there are some important differences between the two:

  • Assets held in a trust don’t have to go through the probate process
  • Trust proceedings are private while wills are made public during probate
  • With a living trust you retain control over your assets until your death; a will only takes effect after your death
  • Creating a living trust ensures a quick and smooth transition of your assets to your beneficiaries

Setting up a living trust in California is an attractive option for many residents because the state has one of the longest and most costly probate processes in the country. What are the reasons behind this?

  • California has high probate fees for individuals who only have a will. And these fees could be charged by both the estate’s executor and the estate attorney.
  • The probate process in California is lengthy, taking anywhere from eight months to several years. 

The next consideration and preparation is in how to fund your living trust.

Where to start

There are several steps involved to setting up a living trust in California:

  1. Begin with a transfer document and list all the assets that will fund the Trust. Assets both physical as well as financial property including real estate, bank and brokerage accounts and other valuables i.e. jewelry, art and collectibles.
  2. If you will fund it with cash, securities, or personal property, the trust will need a bank account. The account must be titled to the trust.
  3. To fund your trust with real estate, you will need to transfer property that passes by deed. This may require executing the deed(s) and recording the title(s), and bank accounts so the owner is now your trust.
  4. Choose a trustee, the person who manages the assets in a trust.
    You can name yourself as trustee, but while your name may be on the account, it will be as trustee of the trust.
    If you named yourself then you must also have a successor trustee who will take over the management of the trust after your death or should you become incapacitated.
  5. Choose your beneficiaries (heirs), the people and/or organizations who will receive your assets after your death. 
  6. Once the transfer document is signed keep it with the Trust records. 
  7. Compose your Declaration of Trusts document, and sign it to make it valid in California. You may choose to have the Declaration notarized, but it’s not required.

And if you are unsure or still have questions it’s always best to consult an estate planning attorney, and if you have a financial advisor include them as well, about how to properly fund the trust.

Making changes down the road

Making changes to a living trust in California is possible at any time as long as you are not mentally incapacitated. For small changes, trust amendment documents can be used and included with the original Declaration of Trust. If you have a lot of revisions, it’s a good idea to consider rewriting your document which is called a “trust restatement”.  

A living trust is an invaluable estate planning tool that an individual can create during their lifetime to protect their assets and have control over the distribution of those assets after their death. However, before setting up your living trust, let’s review what assets you can place in your trust and what you should not put in a living trust.