Living Trusts in California

How a revocable living trust works

Every living trust has the same roles, and at the start you usually hold most of them yourself:

• Settlor (or trustor) — the person who creates the trust and transfers property into it.
• Trustee — the person who manages trust property. You serve as your own trustee during your lifetime; married couples usually serve together.
• Beneficiary — the person the trust benefits. You are the beneficiary during your life; your children, other family or charities follow.
• Successor trustee — the person or professional fiduciary you name to take over at your incapacity or death.
• Pour-over will — a companion will that moves any asset left outside the trust into it and nominates guardians for minor children.

Funding: titling your property in the trust

Signing the trust is only half the work. Real estate is transferred by a deed to you as trustee, recorded with the county; bank and brokerage accounts are retitled or given a payable-on-death designation to the trust; business interests are assigned under the company’s operating agreement or bylaws. Retirement accounts stay in your name and are coordinated through beneficiary designations. Transferring your home into your own revocable trust is not a change in ownership for property tax purposes, so it does not trigger reassessment (Revenue and Taxation Code §62(d)). If an asset is missed, a Heggstad petition (Probate Code §850) may confirm it belongs to the trust — but correct funding avoids that court step.

Living trust or will: what changes at death

With a will alone, assets in your own name above $208,850 generally go through probate — a public court process whose statutory fees are calculated on the gross value of the estate (Probate Code §10810). With a funded trust, the successor trustee gathers the assets, pays final bills and taxes and distributes under the trust’s terms without a probate filing. The trustee still has duties: notifying beneficiaries and heirs within 60 days (Probate Code §16061.7), keeping beneficiaries reasonably informed and accounting for every transaction.

Incapacity: who manages your affairs

If you can no longer manage your finances, your successor trustee takes over the trust property under the incapacity standard written in the trust — often a written determination by one or two physicians. Without a trust or a durable power of attorney, a family may have to petition the court for a conservatorship of the estate (Probate Code §1801). The trust and the power of attorney work together: the trustee manages trust assets, and the agent handles everything outside the trust, such as retirement accounts and tax returns.

Joint trusts for married couples

Most married couples in California sign one joint trust that holds their community property and each spouse’s separate property, with schedules that identify which is which. At the first death the trust can remain fully revocable for the survivor or divide into separate shares, depending on the family, the size of the estate and whether there are children from earlier relationships. Holding community property in the trust preserves its character, and at the first death both halves of community property generally receive a new income tax basis (Internal Revenue Code §1014(b)(6)).

Protecting children and other beneficiaries

A trust can hold a child’s share until a stated age, release it in stages or keep it in trust for life, with a trustee who can pay for education, health and support. Spendthrift provisions protect a beneficiary’s share from the beneficiary’s creditors (Probate Code §15300). For a beneficiary who receives public benefits, a special needs trust can supplement those benefits instead of replacing them. These provisions are a main reason a trust can do more than a will.

Real estate, family cabins and Proposition 19

A trust is the usual way to hold a Truckee or Tahoe home, a vacation cabin or rental property so it passes without probate — including property in Nevada, which would otherwise need a separate probate there. Since February 16, 2021, Proposition 19 limits the parent-child property tax exclusion to a family home or family farm that becomes the child’s principal residence, and only up to the parent’s taxable value plus $1,044,586 for transfers between February 16, 2025 and February 15, 2027. A trust can also set terms for a shared family property: who may use it, who pays the costs and how one heir can buy out the others.

What a living trust does not do

A revocable trust does not protect assets from your creditors during your lifetime (Probate Code §18200), does not reduce income tax — while you are alive the trust reports under your own Social Security number — and does not by itself reduce federal estate tax, which applies only above the exemption of $15 million per person in 2026. It also does not control retirement accounts or life insurance, which pass by beneficiary designation.

Amending, restating and reviewing a trust

While you have capacity you can amend the trust, or replace its terms with a restatement that keeps the original trust name and date so assets already titled in it stay put. Review the trust after a marriage, divorce, birth or death, a move to or from California, a significant purchase or sale, or a change in tax law. A certification of trust (Probate Code §18100.5) lets banks and title companies confirm the trustee’s authority without reading the whole document.