How a Revocable Trust in California Helps Avoid Probate

Estate planning is a critical process for individuals seeking to protect their assets, provide for their loved ones, and ensure a smooth transfer of wealth upon death. A revocable trust not only provides flexibility and control over assets during the grantor’s lifetime but also helps avoid the time-consuming and costly probate process upon death. For California residents, where probate proceedings can be particularly expensive and complex, establishing a revocable trust is often a key component of a sound estate plan. 

What Is a Revocable Trust?

A revocable trust (also known as a living trust) is a legal entity created to hold ownership of assets during the grantor’s lifetime and to distribute those assets upon death according to the grantor’s instructions. The key feature of a revocable trust is that the grantor retains the ability to modify, amend, or revoke the trust at any time during their lifetime, as long as they are mentally competent.

Key Parties Involved in a Revocable Trust:

Grantor – The person who creates the trust and transfers assets into it.

Trustee – The person or entity responsible for managing the trust assets in accordance with the terms of the trust. The grantor often serves as the initial trustee.

Successor Trustee – The person or entity designated to manage the trust and distribute assets after the grantor’s death or incapacity.

Beneficiaries – The individuals or entities entitled to receive the trust assets upon the grantor’s death or at other specified times.

How a Revocable Trust Works:

• The grantor creates the trust document, which sets out the terms for managing and distributing the assets.
• The grantor transfers ownership of assets (such as real estate, bank accounts, and investments) to the trust.
• The grantor retains full control over the trust assets during their lifetime and can amend or revoke the trust at any time.
• Upon the grantor’s death, the successor trustee assumes control of the trust and distributes the assets to the beneficiaries without the need for probate.

The ability to maintain control over trust assets while avoiding probate makes the revocable trust a powerful estate planning tool, particularly in California.

Probate in California

In California, probate can be a lengthy, expensive, and public process.

Why Probate Is a Problem in California:

High Costs – California law allows attorneys and executors to collect statutory fees based on the gross value of the estate:

• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million

For example, a $1 million estate could generate attorney and executor fees of $23,000 or more, even if the estate includes significant debts or liabilities.

Lengthy Process – Probate cases in California often take 12 to 18 months to complete, and complex cases can take even longer. Delays may arise from court backlogs, creditor claims, and disputes among heirs.

Public Disclosure – Probate is a matter of public record, which means that the details of the estate, including the value of assets and the identities of beneficiaries, become accessible to the public.

Risk of Disputes – Probate proceedings can invite challenges from disgruntled heirs or creditors, leading to costly and time-consuming litigation.

When Probate Is Required in California:

• If a person dies with assets titled in their individual name and the total value of the estate exceeds $184,500 (as of 2023), probate is typically required.
• If real estate is involved, probate is usually necessary unless the property is held in joint tenancy or a trust.

Given these challenges, California residents have a strong incentive to structure their estate plans to avoid probate.

How a Revocable Trust Avoids Probate

A revocable trust allows assets to bypass probate because the trust, rather than the individual, holds legal title to the assets. Since the trust is a separate legal entity, trust assets are not considered part of the grantor’s probate estate.

Step-by-Step Process for Avoiding Probate with a Revocable Trust:

Create the Trust – The grantor executes a trust document that sets out the terms for managing and distributing the assets.

Fund the Trust – The grantor transfers legal title of assets to the trust. This may include:

• Real estate (by recording a new deed in the trust’s name).
• Bank and brokerage accounts (by changing the account titles).
• Personal property (by preparing an assignment of property to the trust).

Manage the Trust During the Grantor’s Lifetime – The grantor, as trustee, continues to manage the trust assets as they see fit.

Trigger the Successor Trustee’s Authority Upon Death – Upon the grantor’s death, the successor trustee assumes control of the trust without the need for court approval.

Distribute Assets According to the Trust Terms – The successor trustee pays any debts and taxes, then distributes the assets to the beneficiaries as directed by the trust.

By holding title to assets in a revocable trust, the grantor ensures that those assets will pass to beneficiaries quickly and efficiently without the delays and costs of probate.

Stay up to date on trust and estate law with Continuing Education of the Bar (CEB)

CEB provides a range of online services designed to enhance legal practice, including Practitioner, CEB’s all-in-one legal research solution with authoritative practice guides. Practitioner is meticulously crafted by California lawyers for California lawyers, providing comprehensive insights and resources tailored to your specific needs. All practice guides seamlessly integrate with CEB’s primary law research tool, empowering you to delve into California, Ninth Circuit Court of Appeals, and U.S. Supreme Court case law, alongside California statutes and the California Constitution. As part of the Practitioner subscription, you gain access to DailyNews, ensuring you stay updated on any critical new cases or developments in your field. And don’t forget, Practitioner also includes TrueCite®, CEB’s powerful case law citator, enhancing your research efficiency and accuracy.

Our tools offer unparalleled support in case law research, legal analysis, and staying updated with the latest judicial decisions. By choosing CEB, you gain access to a wealth of knowledge, enabling you to navigate complex legal landscapes with confidence and precision.