As a California resident, you’ve worked hard to build your life. But have you taken steps to protect your assets and ensure they’re distributed according to your wishes after you’re gone? Many Californians are turning to a powerful Estate Planning tool to address these concerns: the Trust. Creating a Trust isn’t just for the wealthy—it’s a valuable option for Californians from all walks of life, whether you own a home, have savings, or run a small business.

In California, the advantages of a Trust go beyond simple asset distribution. They can help you avoid Probate, maintain control over your assets, and protect your privacy. Whether you’re a young professional planning ahead, a parent securing your children’s future, or a retiree organizing your estate, a Trust can be tailored to your needs.

To fully appreciate these advantages, CA Estate Planning attorney Ali Talai explains what a Trust is and how it works in the Golden State.

What is a Trust in California?

Before we explore the advantages, let’s clarify what a Trust is in the context of California law. A Trust is a legal arrangement where you (the grantor) transfer your assets to a Trustee, who manages them for the benefit of your chosen beneficiaries. In many cases, especially with Revocable Living Trusts, you can serve as your own Trustee, maintaining direct control over your assets. In California, you’ll primarily encounter two main types of Trusts:

Revocable Trusts

A Revocable Trust, or Living Trust, allows you to retain full control over your assets. You can modify, add to, or dissolve the Trust entirely if your circumstances change, making it a flexible choice for Estate Planning.

However, since you still have control over the assets in a Revocable Trust, they are considered part of your Estate for tax purposes and creditor claims. That means your assets could still be vulnerable in a lawsuit or subject to Estate taxes, depending on your situation. Additionally, assets in a Revocable Trust are considered part of your estate for Medi-Cal qualification purposes during your lifetime. However, after your death, properly placed assets in a Revocable Trust are generally protected from Medi-Cal recovery claims.

Irrevocable Trusts

An Irrevocable Trust is a powerful estate planning tool, particularly for clients looking to achieve Asset Protection and Estate Tax Planning. Once an irrevocable trust is created, it generally cannot be modified or dissolved by the grantor. While this might seem restrictive, the advantages often outweigh the limitations.

One of the key benefits of an Irrevocable Trust is that assets transferred into the trust are generally removed from the grantor’s taxable estate (if the transfer is a completed gift), thus reducing potential estate tax liabilities. Additionally, these assets are generally protected from creditors, making the trust a valuable option for clients who want to safeguard their wealth from lawsuits or other claims.

However, an Irrevocable Trust can be designed to provide the grantor with indirect control through the inclusion of Trust Protector provisions. A Trust Protector is a third party with the authority to make certain decisions, such as amending the trust or replacing trustees, providing flexibility without violating the irrevocable nature of the trust.

Medi-Cal Planning

In 2024, significant changes have been made to Medi-Cal eligibility that can impact estate and asset protection strategies. As of January 1, 2024, the asset limit for Medi-Cal eligibility has been completely eliminated. This means that for programs like Long-Term Care Medi-Cal, applicants will no longer have their assets considered in determining eligibility. Previously, limits were set at $130,000 for an individual, but now, only income will be used to assess whether an individual qualifies for Medi-Cal (CANHR).

This change provides new opportunities for asset protection and estate planning. Assets such as bank accounts, cash, additional vehicles, and homes will no longer disqualify applicants, making irrevocable trusts an even more flexible tool for preserving wealth while qualifying for Medi-Cal.

Although assets are no longer counted for eligibility, income generated from those assets (like rental income or trust distributions) is still included in the calculation of a recipient’s share of cost for Medi-Cal benefits (CANHR).

Therefore, while an irrevocable trust can protect assets from being counted, the income produced by those assets must be carefully managed.

For individuals planning for Medi-Cal Long-Term Care eligibility, irrevocable trusts can be a useful strategy to preserve assets, especially when structured early enough to meet the Medi-Cal look-back period (which still applies to transfers for nursing facility care). With the removal of asset limits, it’s now easier to protect more of the estate while qualifying for benefits, but careful attention must be given to managing the income aspect of those assets.

Avoiding Probate

What is Probate?

Probate is the court-supervised process of validating a Will and distributing assets after someone passes away. In California, Probate can be time-consuming and expensive.

How Trusts Help You Bypass Probate

A key benefit of setting up a Trust in California is avoiding Probate. Assets in a Trust are distributed according to its terms, bypassing the need for court involvement.

Benefits of Avoiding Probate

By bypassing Probate, you can:

Save your beneficiaries time (Probate in California can take 9-18 months or longer).
Reduce costs associated with court fees and attorney expenses.
Maintain privacy, as Trust distributions aren’t part of the public record.

Note: California does offer simplified Probate procedures for small estates valued at less than $184,500 as of 2024. However, for larger estates, the Probate process can be much more involved, making Trusts an attractive option for those seeking to avoid Probate entirely.

Maintaining Control Over Your Assets

When you create a Revocable Living Trust in California, you retain control over your assets during your lifetime. You can:

Act as the Trustee of your own Trust
Add or remove assets from the Trust
Modify or revoke the Trust entirely

This gives you flexibility to adapt your Estate Plan as circumstances change.

Providing for Incapacity

Another significant advantage of a Trust is its ability to provide for your care if you become incapacitated. Your Trust can specify:

Who will manage your assets if you’re unable to do so
How your assets should be used for your benefit
What medical decisions should be made on your behalf

This can prevent the need for a court-appointed Conservator and ensure your affairs are managed according to your wishes. In addition to a Trust, it’s important to consider other legal tools, such as a Durable Power of Attorney and an Advance Health Care Directive. The directive, which is a statutory document in California, allows you to designate an agent to make healthcare decisions, while the Trust governs your financial matters.

Protecting Beneficiaries

Trusts offer various ways to protect your beneficiaries:

Spendthrift Provisions

You can include spendthrift provisions that prevent beneficiaries from selling or pledging their interest in the Trust, protecting the assets from creditors. However, certain creditors, like those seeking child support or alimony, may still have claims against trust assets.

Special Needs Trusts

For beneficiaries with disabilities, you can create a Special Needs Trust that provides for them without jeopardizing their eligibility for government benefits. California law requires careful drafting of these Trusts to comply with federal and state regulations, ensuring beneficiaries don’t lose access to critical needs-based benefits like SSI or Medi-Cal.

Age-Based Distributions and Inheritance Trusts

You can structure your Trust to distribute assets to beneficiaries at certain ages or milestones, helping to ensure responsible management of inherited wealth. You can also create Inheritance Trusts within your Trust, so that upon your passing, the inheritance for each beneficiary will be placed in an Inheritance Trust. This provides the beneficiary with asset protection from potential future creditors—such as divorce, bankruptcy, or lawsuits—and offers estate tax planning benefits. By doing so, you can help secure your beneficiaries’ inheritance, ensuring it is both protected and tax-efficient.

Tax Benefits

One of the key advantages of creating a Trust in California is the potential for tax savings. While California doesn’t have an Estate tax, and many Californians won’t face federal estate taxes due to high exemption amounts established under the 2017 Tax Cuts and Jobs Act, this exemption is set to sunset at the end of 2025, significantly reducing the exemption from its current level. After the sunset, the exemption will return to pre-2017 levels, potentially subjecting more estates to federal estate taxes. By creating a Trust now, you can plan ahead to avoid or reduce estate taxes, gift taxes, and income taxes, ensuring your assets are protected from unnecessary tax liabilities. In some cases, the savings can be substantial—amounting to hundreds of thousands of dollars.

Flexibility in CA Estate Planning

Trusts offer considerable flexibility in CA Estate Planning:

Customization

You can tailor your Trust to meet your specific needs and goals, whether that’s providing for a blended family, supporting a charity, or managing a business succession.

Privacy

Unlike Wills, which become public record during Probate, Trusts remain private. This can be important if you have significant assets or complex family dynamics.

Ease of Administration

A well-drafted Trust ensures that your Successor Trustee can seamlessly manage your affairs, making the transition smoother for your loved ones.

Additionally, while Trusts are generally less susceptible to court challenges than Wills, they are not completely immune. Common reasons for contesting a trust include claims of undue influence, lack of capacity, or fraud. Although Trusts provide stronger protection in these situations compared to Wills, they can still be contested in court.

As you can see, creating a Trust in California offers numerous advantages, from avoiding Probate to protecting your beneficiaries and maintaining control over your assets. While setting up a Trust requires some upfront effort and cost, the long-term benefits often outweigh these initial investments. Remember, there may also be ongoing costs, such as Trustee fees or Trust maintenance, especially for larger or more complex estates.

Secure Your Future with a California Trust

Are you ready to harness the power of Trusts and take control of your Estate? Don’t let the complexities of Estate Planning in California overwhelm you. At Talai Law Offices, we understand that creating a Trust isn’t just about legal documents—it’s about securing your family’s future and gaining peace of mind.

Whether you’re looking to avoid Probate, protect your assets, or provide for your loved ones in the most effective way possible, now is the time to act. Our dedicated team, led by CA Estate Planning attorney Ali Talai, offers personalized, flat-fee Trust creation and Estate Planning services tailored to your unique situation.

At Talai Law Offices, we’ve reimagined the traditional legal experience. We’ve eliminated hourly billing, focusing instead on clear, upfront pricing. We prioritize open communication, ensuring you’re informed and comfortable throughout the process. Our full-time funding coordinator works diligently to protect your assets for the long term.

The advantages of a Trust are too significant to ignore. If you’ve been searching online for “trust fund lawyers near me,” contact Talai Law Offices instead to schedule your initial consultation. You can reach us by calling (818) 285-2850 or by completing our confidential online form.

Let’s work together to craft a Trust that meets your needs, protects your assets, and secures your family’s future. The sooner you start, the sooner you’ll enjoy the peace of mind that comes with a well-structured California Trust.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.

Talai Law Offices, Inc.
6300 Canoga Ave Suite 550
Woodland Hills, CA 91367
(818) 285-2850
https://talailaw.com/

What are the Advantages of a Trust in California?