Creation of a California Revocable Trust
A “trust” is not a “will”, which is a separate document that would be included in your estate plan.
A trust is not officially a contract or agreement, but it has that same impact.
A trust is like an entity as in some cases where the trust will have it’s own tax identification number (TIN or EIN).
A trust is a estate planning vehicle to hold your assets and provide for you while you are alive and then distribute your assets, as you instruct, after your death.
The big keys you need to make a trust are:
1) Intent to make a trust (California Probate Code section 15201);
2) Mental Capacity to make a trust;
3) A trust must have property (PC 15202)
4) There must be a legal purpose to trust (PC15203)
5) A trust must have a beneficiary (PC 15205)
6) It generally has to be in writing (Statute of Frauds) though there can be rare exceptions. (probate code 15206 and 15207)
Each trust is customized for each person/trustor, and some clauses are more important to some based on their situation and needs.
These are the general sections and pieces of a California revocable or “living” trust.
Who are the players in the trust?
Settlor/Grantor/Trustor – This is the person who establishes the trust.
Trustee – This is the person who manages the assets in the trust. It is generally OK tha that Settlor is the initial trustee.
Beneficiary – The person who receives property from the trust. Typically this includes the Settlor who benefits from the trust during their lifetime.
KEY CLAUSES: Introduction of the above players is first. Then a quick review of what assets are the property of the trust. Typically this is linked to a schedule of assets attached to the trust but, of course, this does NOT mean those assets are “in” the trust. More is needed to get assets “in” to the trust. Next is a paragraph about how the trust is for the benefit of the Settlor while they are alive.
The Settlor may be alive but incapacitated and thus the trust agreement has to have language instructing the trustee to take care of the Settlor while they are alive.
What happens after the Settlor dies? This is the most customized section of a trust. There are options, and and that’s where an experienced estate planning attorney is essential.
Who will be TRUSTEE of the trust? It’s so important that this person be trustworthy. The trustee section includes things about surety bonds, accountings, trustee compensation and other issues related to the trustee.
Powers of the trustee: Usually you want your trustee to have broad power and discretion and that’s where these powers come into play. If you don’t want your trustee to have broad powers, perhaps you need a different trustee. The power to amend or revoke the trust is included in all revocable trusts. That is, the Settlor might want to change their trust and thus they need to be given the power to do so.
General provisions and definitions are included – Spendthrift clause, payment of taxes, holding of life insurance, and others about alternate termination.
Perpetuities saving clause – that your trust can not go longer than the California rule against perpetuities allows. This is longer than you will be alive, plus everybody that is alive today, plus 21 years.
The qualified sub-chapter S clause – for those who might own a business, because this is a popular way to incorporate and it requires specific trust provisions to prevail after death.
No contest clause – It is probably OK to default to having a no contest clause but that doesn’t mean it’s right for every single person.
Name of the trust and any sub-trusts (generally created after death) is listed – such as like the “Johnson Family Trust” for example.
This is for information only about creation of a revocable trust in California and is not the providing of legal or tax services. You should hire and work with an experienced California estate planning lawyer and not do this yourself.