Everything You Need To Know About Setting Up a Trust in California

setting up a trust

If you live in California, you should consider setting up a trust. A trust is organized to help protect assets and allows you to have more control over your property than would be possible with other types of estate planning tools. A trust can help you avoid probate, minimize or eliminate the federal estate tax and provide more privacy to your beneficiaries. Here’s everything you need to know about setting up a trust in California.

What is a Trust?

A trust is an important estate planning document. It is a legal arrangement in which one person (“the trustee”) holds assets for the benefit of another person or entity (“the beneficiary”). Trusts have many benefits, including avoiding probate, protecting assets from creditors, and expediting asset transfers after death.

Several types of trusts may be beneficial to your estate, including:

  • Revocable trust — a revocable trust is a trust that allows you to transfer property into the trust while you’re alive; it allows the grantor (you) to modify the trust after its creation and remain in control of the trust assets until your death
  • Irrevocable trust — irrevocable trusts function the same way as a revocable trust, yet they can not be modified after creation
  • Testamentary trust — a testamentary trust is a trust created by your will; it takes effect only after your death

Steps to Setting Up a Trust

A trust is an important legal document. It will serve as the guiding north star in settling your estate after your death. You should take great care in preparing this document.

Here’s a step-by-step guide to setting up a trust in California.

  1. Determine which type of trust you need
  2. Decide on the assets to include in your trust — you can include cash, real estate, investment accounts, cryptocurrency, and more in your trust document
  3. Select beneficiaries for those assets — you can choose any number of beneficiaries for your estate, including family members, friends, charitable organizations, etc.
  4. Determine the rules of your trust — you can set parameters of how and when your assets will be distributed to your beneficiaries
  5. Choose a trustee (or trustees) — select a responsible person (or persons) to control, manage and distribute your estate; this could be a family member, friend, or unbiased third parties like an attorney or bank
  6. Create the trust document — draft the declaration of trust document with an experienced estate planning attorney

Why You Need a Trust in California

Setting up a trust fund is important for your family’s financial well-being. A trust can help you avoid probate and protect your estate from creditors. Your heirs may be able to reduce or eliminate their tax liability for estate taxes, inheritance taxes, and capital gains tax. Upon your death, a trustee will receive trust funds and property and distribute them according to instructions in your trust document.

Suppose you didn’t set up a trust. Instead, you left a will appointing an Executor and named the beneficiaries of your estate. In that case, when you die, your loved ones would need to settle your estate in probate court. The details of your estate would be public knowledge, your family members would have the opportunity to contest your wishes in court, and the court would take money from the estate to oversee the process.

California has some of the most expensive probate fees.  Probate fees are set by California probate code § 10810, which caps the maximum fees that attorneys and executors can charge for a probate. There are filing fees and a fee percentage (4%,3%,2%,1%, and .5% based on the gross value of the probate estate), and can have other extraordinary fees like appraisals. The following is a breakdown of fees involved:

Probate Fees Chart: (Gross Estate)
4% of the first $100,000.00
3% of the next $100,000.00
2% of the next $800,000.00
1% of the next $9,000,000.00
.5% of the next $15,000.00
Above $25,000,000.00, the court will determine


On top of that, the probate process can take months to conclude, dragging your family members back and forth to the court during their grieving process. Setting up a trust ensures more money stays in the hands of the ones you love and may reduce family conflict.

A Trust Does Not Replace a Will in Your Estate Plan

Setting up a trust does not eliminate the need for a will in your estate plan. Why? Because a trust rarely ever includes all of your assets, and a will serves other purposes outside of asset transfer. Even if, you do transfer all of your assets into your trust, there’s still the possibility that you will acquire additional property before your death. If so, that property will not be subject to the terms of the trust. A will allows you to transfer ownership of property that you did not specifically name in your trust document. Additionally, a will can allow you to appoint guardians for minor children and leave details about your wishes for funeral arrangements, etc. An attorney can discuss the different types of wills available and how they can benefit your estate plan.

How an Estate Planning Attorney Can Help You

If you’re considering setting up a trust in California, an estate planning attorney can help you. Estate planning attorneys understand state law and can help you draft an airtight estate plan to avoid hiccups in the administration of your estate. They’ll ensure that your trust document is drafted clearly and legally, help you name a trustee, and tend to other facets of your estate plan, like a will or advance health care directive. When you need comprehensive estate planning in California, look no further than Santa Barbara Estate Planning & Elder Law. Book a free planning session with our attorneys today to discuss your goals.

Author Bio

Julianna Malis is the Founder and Managing Partner of Santa Barbara Estate Planning & Elder Law, a Santa Barbara estate planning law firm she founded in 2014. With more than 25 years of experience practicing law, she has dedicated her career to representing clients in a wide range of legal matters, including estate planning, elder law, Medicaid and Medicare planning, probate, and other estate planning areas.

Julianna received her Juris Doctor from the University of the Pacific — McGeorge School of Law and is a member of the California State Bar Association.

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