Living Trust / Estate Planning

Having a revocable living trust in California is crucial for several reasons, particularly in the context of estate planning, privacy, and asset management. A revocable living trust allows you to avoid probate, which can be a time-consuming and costly process. By transferring assets into the trust during your lifetime, the trust ensures that these assets are distributed according to your wishes without the need for court involvement. This is especially beneficial if you own property in multiple states, as it eliminates the need for ancillary probate proceedings in each state Estate Planning Strategies and Devices (CA), § 9.02 Comparing Trust and Probate Procedures, § 73.10 The Trust Administration Process.

Additionally, a revocable living trust provides privacy, as trust administration does not involve public court proceedings, unlike probate. This can help keep your financial affairs confidential. The trust also allows for continuity of asset management in the event of your incapacity, avoiding the need for a conservatorship. The trustee can manage the trust assets on your behalf, ensuring that your financial matters are handled seamlessly § 9.02 Comparing Trust and Probate Procedures, § 73.10 The Trust Administration Process.

In California, a revocable living trust can also protect your residential address from disclosure in real property transactions. For example, program participants under certain state laws are authorized to place their real property into a revocable living trust to safeguard their residential street address from public records § 6215.12. Required notice to program participants, § 6209.5. Required notice to program participants. Furthermore, the trust provides flexibility, as it can be amended or revoked during your lifetime, allowing you to adapt it to changing circumstances § 15400. Presumption of revocability, § 15401. Method of revocation by settlor; Limit on modification or revocation pursuant to power of attorney, Aulisio v. Bancroft, 230 Cal. App. 4th 1516.

However, it is important to ensure that all assets intended to be part of the trust are properly transferred into it during your lifetime. Failure to do so may result in those assets being subject to probate, defeating one of the primary purposes of the trust Estate Planning Strategies and Devices (CA), § 73.10 The Trust Administration Process.

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."

Failing to transfer all intended assets into a revocable living trust in California can lead to significant consequences, including the need for probate, additional expenses, and potential disputes over asset distribution. Assets not properly transferred into the trust remain part of the settlor's estate and may be subject to probate proceedings, which can be costly and time-consuming. For example, in Fla. Bar v. Schramek, 616 So. 2d 979, the failure to transfer assets into a trust resulted in the estate incurring unnecessary probate costs and expenses Fla. Bar v. Schramek, 616 So. 2d 979.

Under California law, property held in a revocable living trust is considered the property of the settlor during their lifetime. If assets are not transferred into the trust, they are not governed by the trust's terms and may instead be distributed according to the settlor's will or intestacy laws if no valid will exists. This principle is supported by California case law, which recognizes revocable living trusts as probate avoidance devices but emphasizes the necessity of proper asset transfer to achieve this purpose Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP, 184 Cal. App. 4th 196, Steinhart v. County of Los Angeles, 47 Cal. 4th 1298.

Additionally, disputes may arise if the settlor's intent to include certain assets in the trust is not clearly documented or effectuated. In Ladd v. Ladd, 323 S.W.3d 772, the court highlighted that a written declaration of trust alone is insufficient to transfer real property into a trust without an express transfer or deed Ladd v. Ladd, 323 S.W.3d 772. Similarly, in Dudek v. Dudek, 34 Cal. App. 5th 154, the failure to execute a deed transferring property into a trust led to complications in confirming the trust's ownership of the property Dudek v. Dudek, 34 Cal. App. 5th 154.

To avoid these issues, it is critical to follow proper procedures for transferring assets into the trust, such as executing deeds for real property or retitling financial accounts. Attorneys should ensure that settlors understand the importance of funding the trust and their responsibilities in the process, as outlined in the "Funding Revocable Trust Checklist (CA)" Funding Revocable Trust Checklist (CA).

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."

California law provides mechanisms to address disputes over assets not properly transferred into a revocable living trust. Under the California Probate Code, a written declaration of trust can be sufficient to establish a trust over certain assets, even if the formal transfer of title to the trust was not completed. For example, in Estate of Heggstad, the court held that a written declaration of trust by the settlor was sufficient to include real property in the trust, even though the settlor had not executed a deed transferring the property to the trust. The court affirmed that the probate court had jurisdiction under § 17200. Petitioners; Grounds for petition to determine whether the property was part of the trust Estate of Heggstad, 16 Cal. App. 4th 943.

However, if assets are not properly transferred into the trust during the settlor's lifetime, they may not automatically become part of the trust estate upon the settlor's death. In such cases, probate proceedings may be necessary to administer those assets. For instance, real property not transferred to the trust would typically require probate administration to pass to the intended beneficiaries, as the trust mechanism cannot operate on property not included in the trust estate Estate Planning Strategies and Devices (CA).

Additionally, California law recognizes that property held in a revocable living trust remains the property of the settlor during their lifetime. This means that the settlor retains full ownership and control over the property, and creditors may reach such property if necessary. This principle underscores the importance of properly transferring assets into the trust to ensure they are governed by the trust's terms Zanelli v. McGrath, 166 Cal. App. 4th 615, Boshernitsan v. Bach, 61 Cal. App. 5th 883.

In summary, while California law allows for certain remedies to include assets in a trust posthumously, such as through court determinations under § 17200. Petitioners; Grounds for petition, the failure to properly transfer assets into a trust during the settlor's lifetime can complicate the administration of those assets and may necessitate probate proceedings Estate of Heggstad, 16 Cal. App. 4th 943, Estate Planning Strategies and Devices (CA).

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."

In California, the property of a revocable living trust is fully accessible to the settlor's creditors during the settlor's lifetime. This is codified in § 18200. Creditor’s rights against revocable trust during settlor’s lifetime, which states that if the settlor retains the power to revoke the trust, the trust property is subject to the claims of the settlor's creditors to the extent of the power of revocation during the settlor's lifetime Dale Exploration, LLC v. Hiepler, 2018 ND 271, Laycock v. Hammer, 141 Cal. App. 4th 25, § 114.02 Irrevocable Inter Vivos Trust.

The rationale behind this rule is that a revocable trust is treated as the settlor's property for purposes of creditor claims. Since the settlor retains control over the trust assets, including the ability to revoke the trust and reclaim the property, creditors can reach those assets as if they were owned outright by the settlor. This principle is consistent with the general rule under the Uniform Trust Code and the Restatement (Third) of Trusts, which treat the assets of a revocable trust as part of the settlor's estate for creditor purposes Dale Exploration, LLC v. Hiepler, 2018 ND 271, Laycock v. Hammer, 141 Cal. App. 4th 25, JPMorgan Chase Bank, N.A. v. Ward, 33 Cal. App. 5th 678.

Additionally, California law does not allow a settlor to use a revocable trust as a shield against creditors. Courts have consistently held that the assets in a revocable trust are subject to creditor claims during the settlor's lifetime, as the settlor retains the functional equivalent of ownership over the trust property Laycock v. Hammer, 141 Cal. App. 4th 25, JPMorgan Chase Bank, N.A. v. Ward, 33 Cal. App. 5th 678, Galdjie v. Darwish, 113 Cal. App. 4th 1331.

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."

In California, the property of a revocable living trust is fully accessible to the settlor's creditors during the settlor's lifetime. This is codified in § 18200. Creditor’s rights against revocable trust during settlor’s lifetime, which states that if the settlor retains the power to revoke the trust, the trust property is subject to the claims of the settlor's creditors to the extent of the power of revocation during the settlor's lifetime Dale Exploration, LLC v. Hiepler, 2018 ND 271, Laycock v. Hammer, 141 Cal. App. 4th 25, § 114.02 Irrevocable Inter Vivos Trust.

The rationale behind this rule is that a revocable trust is treated as the settlor's property for purposes of creditor claims. Since the settlor retains control over the trust assets, including the ability to revoke the trust and reclaim the property, creditors can reach those assets as if they were owned outright by the settlor. This principle is consistent with the general rule under the Uniform Trust Code and the Restatement (Third) of Trusts, which treat the assets of a revocable trust as part of the settlor's estate for creditor purposes Dale Exploration, LLC v. Hiepler, 2018 ND 271, Laycock v. Hammer, 141 Cal. App. 4th 25, JPMorgan Chase Bank, N.A. v. Ward, 33 Cal. App. 5th 678.

Additionally, California law does not allow a settlor to use a revocable trust as a shield against creditors. Courts have consistently held that the assets in a revocable trust are subject to creditor claims during the settlor's lifetime, as the settlor retains the functional equivalent of ownership over the trust property Laycock v. Hammer, 141 Cal. App. 4th 25, JPMorgan Chase Bank, N.A. v. Ward, 33 Cal. App. 5th 678, Galdjie v. Darwish, 113 Cal. App. 4th 1331.

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."

The key differences between revocable living trusts and irrevocable living trusts in California primarily revolve around the settlor's ability to modify or revoke the trust, the control over trust assets, and the tax implications.

A revocable living trust allows the settlor to retain control over the trust assets during their lifetime. The settlor can amend or revoke the trust at any time, provided they are competent, unless the trust instrument explicitly states otherwise § 15400. Presumption of revocability, § 15401. Method of revocation by settlor; Limit on modification or revocation pursuant to power of attorney, Characteristics and Uses of Trusts (CA). During the period the trust is revocable, the settlor retains the rights typically afforded to beneficiaries, and the trustee owes duties primarily to the settlor rather than the beneficiaries § 15800. Limits on rights of beneficiary of revocable trust, § 15802. Notice to beneficiary of revocable trust, § 16069. Exceptions to duty to account, provide terms of the trust or requested information. Upon the settlor's death or incapacity, the trust generally becomes irrevocable, and the trustee's duties shift to the beneficiaries § 16061.7. Trustee’s duty to serve notification of changes; Contents; Damages.

In contrast, an irrevocable living trust cannot be amended or revoked by the settlor once it is created, unless all beneficiaries consent and a court determines that modification does not defeat a material purpose of the trust Characteristics and Uses of Trusts (CA), § 15403. Modification or termination of irrevocable trust by all beneficiaries. The settlor relinquishes control and enjoyment of the trust property, effectively parting with the assets permanently § 60.17 Estate Planning Tools, § 3.05 Basic Estate Planning Arrangements, § 81.03 Basic Types of Trusts. This type of trust is often used for specific purposes, such as tax planning or asset protection, as the assets transferred to the trust are generally excluded from the settlor's estate for tax purposes Characteristics and Uses of Trusts (CA), § 60.17 Estate Planning Tools, § 81.03 Basic Types of Trusts. However, the settlor must carefully consider whether they can part with the assets permanently, as they cannot reclaim them or benefit from them directly in the future § 3.05 Basic Estate Planning Arrangements, § 81.03 Basic Types of Trusts.

In summary, the primary distinction lies in the settlor's ability to retain control and flexibility with a revocable trust versus the permanence and potential tax advantages of an irrevocable trust. These differences should be carefully evaluated based on the settlor's goals and financial circumstances Characteristics and Uses of Trusts (CA), § 60.17 Estate Planning Tools, § 81.03 Basic Types of Trusts.

"The information contained here is only for educational purposes. This does not constitute legal advice, or any attorney-client representation. You should seek legal advice from your attorney or consider having us represent your case."