Living trusts in California are legal documents that many people use in place of wills for estate planning purposes. When you establish a living trust you transfer ownership of assets such as real estate and bank accounts to the trust during your lifetime. A trustee manages the trust on a day-to-day basis and when you die assets held in the trust are distributed to the beneficiaries named in the trust. Living trusts are revocable, which means you can make changes or revoke the trust at any time.
You can serve as the trustee of your own trust, in which case you avoid the cost of hiring a trustee and retain full control over the management of the assets held in the trust. If you appoint a trustee, that person must manage the trust for your own benefit in line with instructions contained within the trust document. Many people name a successor trustee who assumes control of the trust upon the death of the original trustee.
Under California law, assets bought once you are married or in a domestic partnership are communal property and your partner can manage communally owned accounts and property if you become incapacitated. However, any property you bought before entering into marriage or a partnership belongs to you as an individual and if you become incapacitated, your spouse or partner must go through a court process known as conservatorship to try to gain control of such assets. If you and your spouse or partner establish a trust and transfer ownership of your assets to it, you avoid such issues because the trust owns the assets.
When you die, your estate must go through the probate process, during which anyone with claims on your assets can petition to receive a share of your estate. The probate hearings are often expensive and lengthy. However, if you transfer ownership of your assets to a trust during your lifetime your estate does not have to go through probate. A "pour-over will" may be established in addition to trusts. These wills largely contain the same information in terms of distributing your assets but serve as a backup in case you fail to include any of your property in your trust. The probate court handles the settlement of any assets listed in the pour-over will but not the trust.
Living trusts in California are established under your own Social Security number, so you do not have to file taxes separately for the trust entity. While you can include measures in a trust that reduce the tax liability of the trust after your death, such provisions are not exclusive to trusts, and you can make similar arrangements even if you have just a standard will.
You should hire a lawyer licensed to practice in California to prepare your trust but due to the costs involved, trusts are best suited to people with significant assets.