Who Needs a Trust in California?
The first question most people want to know: Do I need a trust? It depends!
Everyone’s situation is different, and it’s not always clear without talking to you directly about your assets, debts, goals, and priorities. That said, there are three parameters when I definitely recommend having a trust as part of your comprehensive estate plan. (The comprehensive estate plan should include a trust, will, financial power of attorney, healthcare power of attorney, and a few other documents.)
You have more than $208,500 in assets.
You have minor children.
You own real property in California.
What if you don’t meet any of those three? You’re not off the hook from having a trust. You should still speak to a lawyer to determine the best course of action for your family.
More than $208,500 in Assets
If you have more than $208,500 in assets, then your estate will trigger a probate in most circumstances. This dollar value excludes anything that has a living beneficiary on it. But if you name a beneficiary and that person dies before you (predeceases you), then the account may need to go through probate.
The dollar value is the total across ALL accounts that can be excluded from a trust or beneficiary designation. In other words, if you have one account with $50,000 and one with $150,000, and another with $9,000, then you’re over the $208,500 and all of these accounts will go through probate.
Probate takes 18-24 months before anyone gets anything; it costs way more than setting up a trust; and it is a public proceeding. Avoid it.
Minor Children
If you have minor children, you should decide the age that you want your child to have control of any funds. If you don’t have a trust, and leave everything to your child in a will or through beneficiary designations, then the funds go into a custodial account and your kids will get to control it all as soon as they turn 18.
If you don’t have a will or a trust, the state will get to decide who gets your assets. Isn’t it better that you decide?
Real Property in California
Real property in California can create a kerfuffle with regard to probate. Starting April 1, 2025, real property valued at $750,000 or less can go through a simplified court process for transferring title to the heir of someone who died. But it still involves going to court. And is the heir who you would want to get it? Is it the best tax decision?
If you have a trust, you can determine who gets the real property in your trust, avoid probate, and potentially help decrease any conflicts.
Of course, there are many other considerations when deciding whether or not a trust is the right estate planning tool for you. I recommend speaking with an attorney who can lay out the pros and cons, costs and benefits — and can guide you based on your goals and priorities.
If you have questions about whether you should have a trust, please reach out for a consultation!