Estate planning guide
How to Create a Living Trust
Make a few decisions, sign the trust before a notary, then move your home and accounts into it. Here is each step, in order.
Reviewed by Jay S. Yu, Esq.
Why it matters
Signing is only half the job.
A revocable living trust lets your family avoid probate and lets someone you choose manage your affairs if you become unable to. It does those things only if it is set up correctly and actually holds what you own.
Creating a living trust in California comes down to three stages: the decisions you make, the documents you sign, and the transfer of your home and accounts into the trust. Many of the problems families run into later trace back to that last stage, not the first two.
This guide walks through each stage in order, explains what California law requires along the way, and points out where do-it-yourself trusts often fall short. If you are still deciding whether you need a trust at all, start with our guide to choosing between a trust and a will.
What do you decide before the trust is drafted?
The trust is drafted from your decisions, so they come first. Expect to settle these:
Who serves as trustee. Most people name themselves, or both spouses, while they are living, so nothing changes in how they manage their property.
Who takes over. A successor trustee manages the trust if you can no longer do it and distributes it after your death. Most plans name a first choice and at least one backup.
Who inherits, and in what shares, including what happens if a beneficiary dies before you.
When younger beneficiaries receive their shares. A trust can hold a share until a set age instead of handing it over at 18.
Specific gifts, such as a house to one child, a set amount to a charity, or personal items to particular people.
Who would raise minor children. A guardian is usually named in your will, so the will and the trust are planned together.
What documents come with a living trust?
A living trust is rarely signed alone. A complete trust-based plan in California usually includes:
The revocable living trust, which holds your property and says who receives it.
A pour-over will, which sends anything left in your name into the trust (those assets may still need a court process first) and names a guardian for minor children.
A certification of trust, a short signed summary that banks and title companies can accept in place of the full trust.
A durable power of attorney, so someone you trust can handle your finances outside the trust, such as retirement accounts and tax matters.
An advance health care directive, which names who makes medical decisions for you and records your wishes.
A deed that moves your home into the trust, which our office prepares with the other documents.
The trust controls only what it owns. While you are living, the power of attorney and the health care directive cover what the trust cannot, including medical decisions.
How is a living trust signed in California?
You sign the trust as the person creating it, often called the settlor or trustor, and in most plans you also sign as its first trustee. California requires a trust that holds real estate to be set out in a signed writing.
Your signature on the trust is customarily notarized. California does not require the trust itself to be notarized, but banks and title companies expect it; the certification of trust must be notarized, and so is the deed to your home.
Once everything is signed, the trust exists. Until it holds your property, though, it controls nothing. That is the next stage.
How does your home go into the trust?
Your home moves into the trust by deed: you, as owner, transfer it to yourself as trustee of your trust. Our office prepares that deed along with the trust.
Moving your home into your own revocable trust does not trigger a property tax reassessment. California does not treat the transfer as a change in ownership, so your assessed value is not reset.
A mortgage does not stand in the way. For a home with fewer than five units, federal law generally keeps a lender from calling the loan when you transfer the home into a living trust in which you remain a beneficiary and keep living there. Our guide to moving a mortgaged home into your living trust covers the details.
If you own other real estate, such as a rental or a property in another state, each one needs its own transfer, and property outside California follows that state’s rules.
What about bank accounts, investments, and retirement accounts?
Accounts move into the trust one at a time, and each type is handled differently:
Bank and brokerage accounts are retitled in the name of the trust, or the trust is named as the account’s payable-on-death or transfer-on-death beneficiary.
Retirement accounts such as IRAs and 401(k)s are not retitled. They pass by beneficiary designation, and the choice of beneficiary has tax consequences, so those forms are reviewed with the trust.
Life insurance also passes by beneficiary designation. Many families with young children name the trust as beneficiary.
Household goods and personal items are usually covered by a general assignment to the trust, signed with the other documents.
Our guide to funding your living trust walks through each type of asset, including the ones people often miss.
Can you create a living trust yourself?
You can. California has no required form for a living trust, and templates are easy to find online. The risk is usually not the form itself but what gets left out:
A trust that is signed but never funded. Property left in your own name can still go through probate.
A deed that does not match the trust, or a home that is never transferred.
Beneficiary designations that contradict the trust.
No backup successor trustee, or no plan for incapacity.
A pour-over will or guardian nomination that was never signed.
These problems tend to surface only after the person who created the trust has died or become incapacitated, when they are harder and more expensive to fix.
Talk with us
Montanez Yu prepares complete trust-based estate plans for individuals and families throughout Southern California, including the trust, the pour-over will, powers of attorney, health care directives, and the deed that moves your home into the trust. We handle consultations and planning meetings remotely. Estate planning consultations are free, and every plan is a flat fee, quoted in writing before we begin. Call (951) 444-7407 or request a free consultation.
This guide is general information about California law, not legal advice for your situation.