Who can create a trust in Torrance, California?

Our Dedicated Estate Planning Lawyers Explain the Requirements for Establishing a Trust in CA

Almost anyone who meets California’s requirements can establish a trust to protect their assets, secure their children’s inheritances, or shield their savings from Medicaid’s stringent income limits. However, setting up a trust isn’t just a matter of eligibility. Different types of trusts are bound by different rules, all of which can make the process of formation and administration much more difficult than expected.

Your trust is your legacy, and you don’t have to leave your legacy to chance. The Torrance estate planning Law Firm of Kavesh, Minor & Otis, Inc. has spent decades helping California families anticipate challenges, overcome obstacles, and create plans that protect their peace of mind. Our CA attorneys explain the requirements for setting up a trust.

Establishing a Trust in Torrance: California Rules for Grantors

A trust is a special type of legal arrangement that lets an individual manage assets for the benefit of another person. Trusts can serve many purposes, but they are most often used to protect inheritances and to provide families with a safe alternative to probate.

Since California law lets residents establish trusts for almost any reason, there is no one-size-fits-all approach to trust formation or administration. However, the state does set hard limits on who can and cannot form a trust. Under most circumstances, you can only establish a trust if:

You are over the age of 18

You are of “sound mind”

Since different types of trusts serve very different purposes, grantors must sometimes meet additional requirements. A non-citizen, for instance, can almost always establish a revocable living trust to protect property interests in the United States, but they may not be able to form an NFA gun trust unless they have a green card or can prove that they are an eligible California resident.

Requirements of a Trust

Your reason for establishing a trust will typically determine its form and its terms, but most trusts are required by law to meet very specific conditions. In California, a trust is only considered valid if all of the following are true:

The individual who establishes the trust, the “grantor,” has clearly stated their intent to form a trust.

The trust has been funded.

The trust names at least one beneficiary.

Certain types of trusts allow the grantor to act as a trustee for the remainder of their lifetime.

If you name yourself as the trustee of a revocable living trust, you can manage and access trust assets as you see fit. You also reserve the right to alter the trust’s terms at any point before death, letting you retitle trust assets or add and remove beneficiaries.

After you die, another person—the successor trustee—takes the reins.

Successor Trustees in California Trust Administration

The successor trustee is responsible for administering the trust in accordance with your wishes. They can use their own discretion when making important decisions about the trust’s funds, but they cannot revoke the trust’s charter or take trust assets for their own use. Instead, successor trustees are bound by a “fiduciary duty” requiring that they act only in the best interests of the trust and its beneficiaries.

The Different Types of Trusts

The California Probate Code provides a broad definition of what constitutes a trust. According to the Probate Code’s section on trust law, a “trust may be created for any purpose that is not illegal or against public policy.” People create trusts for a variety of reasons: to condition the inheritance of their heirs, to separate personal assets from estate assets, and to set aside funds for charitable purposes.

In estate planning, most trusts established under California law fall into either of the following two categories:

A revocable living trust. A revocable living trust is a trust that is established during the grantor’s lifetime. Since the trust is revocable, the grantor can revoke the trust or alter its terms at any time. Assets held by a revocable living trust are removed from the grantor’s estate after death and are, therefore, exempt from probate.
An irrevocable living trust. Irrevocable living trusts are also established during the grantor’s lifetime, but they cannot be revoked without consensus from the grantor, trustees, and beneficiaries. Grantors can retain an interest in trust assets, but they cannot control them.

The most common types of revocable and irrevocable living trusts include, but are not limited to, the following:

Revocable Living Trusts

A revocable living trust is a broad category of trust that can be leveraged to retain control of trust assets while ensuring that inheritances are not subject to probate. Revocable living trusts can receive and manage assets, including the following:

Your home
A vacation property
Commercial real estate
Motor vehicles
Home appliances
Personal possessions

Some people form revocable living trusts to protect very specific kinds of assets, like firearms or an art collection. These trusts are sometimes subject to more rules and regulations than other categories of revocable living trusts but may contain better protections for trust-controlled assets.

Medicaid Asset Protection Trusts

Medi-Cal has strict income limits that make it difficult for most people with significant savings to qualify. However, the costs of long-term care are high—high enough that many people cannot pay out of pocket for a nursing home without having to sacrifice their children’s inheritances.

Medicaid trusts let grantors meet Medicaid asset limits by transferring properties, accounts, and income to a special type of irrevocable trust.

Grantor Retained Annuity Trusts

A grantor retained annuity trust (GRAT) is an irrevocable trust that facilitates the transfer of large financial gifts to family members.

Most GRATs are established for a very specific length of time. Once the trust is active, it pays annuities to the grantor, who is entitled to recover the amount of their initial transfer. After it expires, the trust’s remaining assets are distributed to beneficiaries.

GRATs can minimize or negate gift tax-related penalties, but they carry built-in risks that warrant some consideration.

Special Needs Trusts

A special needs trust (SNT) is an irrevocable trust that provides money, resources, and assets to maintain or improve the quality of life of a person with special needs. If an SNT is structured properly, it lets the beneficiary receive substantial support without losing access to critical public benefits.

Life Insurance Trusts

A life insurance trust, or “Irrevocable Life Insurance Trust,” is used to hold the proceeds of a life insurance policy. The grantor works with their appointed trustee to set conditions for payouts, which minimizes the risk of transferring large sums of money to a young, vulnerable, or financially irresponsible beneficiary.

Pet Trusts

A pet trust helps ensure that a furry or winged family member receives the love that they deserve if you can no longer provide for their needs. Pet trusts are, in most cases, the only way to guarantee that specially allocated funds are actually used for a pet’s betterment.

Do You Need To Speak With A Trust & Estate Administration Attorney?

If you need to speak with an experienced California trust and estate administration lawyer please contact us online or call us directly at 800.756.5596 to discuss scheduling a free appointment. Please note that our firm can only meet with the Successor Trustee or Executor of a decedent’s CA trust or will. Our firm does not meet with beneficiaries. Additionally, we do not contest or litigate any trusts or wills. Our trust and administration law firm proudly serves clients throughout California from our main office in Torrance, as well as those in Redondo Beach, Manhattan Beach, Hermosa Beach, Segundo, San Pedro, and Rancho Palos Verdes.

When You Want the Very Best for Your Loved Ones, Choose Us.

Experience and Expertise. Estate planning and post-death administration are all we do. Our attorneys have over 70 years of combined expertise in the field, and three of our attorneys have passed an additional Bar examination and peer review process to become State Bar Certified Specialists in Estate Planning, Trust and Probate Law. Two of our attorneys also have Master’s Degrees in Tax Law, giving us unique insight into how estate tax and income tax will affect your family’s inheritance.

Customization and Attention to Detail. Before we create or update your estate plan, we get to know you, your goals, and what matters to you most. We take the time to listen to your concerns and attend to each of your unique needs and desires as if they were our own. When we complete your plan, we perform a detailed quality control process to help ensure your objectives are met. We also provide you with a personalized Owner’s Manual containing all of your important documents, and your Successor Trustee with a Manual containing helpful, plain-English checklists and easy-to-follow procedures.

Lifetime Relationship. All of our estate plans include a free ongoing service package. We take phone calls any time you have questions, perform free estate planning checkups every three years, and keep you abreast of changes in the law and planning strategies with our complimentary newsletters and educational seminars. And, when the time comes, we will be there to help your trustee and loved ones.