Trusts Overview
Types of Trusts in California
Trusts come in many forms — each with its own purpose, tax treatment, and implications for real estate. Here are the main types you’ll encounter in California, plus what to do if you’re serving as a Successor Trustee.
Revocable Trusts
The most common trust for California homeowners. The grantor keeps control during their lifetime and can amend or revoke the trust at any time. Property held in a revocable trust avoids probate and passes to beneficiaries per the trust document.
Irrevocable Intervivos Trusts
Created and funded during the grantor’s lifetime and generally cannot be changed or revoked. Used for asset protection, tax planning, and Medi-Cal planning. Sales from these trusts have different tax implications than revocable trust sales.
Charitable Remainder Trusts
Provide income to a non-charitable beneficiary for a set period, with the remainder passing to a designated charity. Often used when a highly appreciated property is being sold — the trust structure can reduce capital gains exposure.
Charitable Lead Trusts
The inverse of a remainder trust: the charity receives income first, then the remainder passes back to non-charitable beneficiaries (usually family). Used for estate-tax planning on larger estates.
Irrevocable Life Insurance Trusts
Holds a life insurance policy outside the taxable estate. Not typically a real estate holder, but often part of a broader estate plan you’ll see referenced in trust documents.
Generation-Skipping Trusts
Passes assets to grandchildren (or later generations) rather than the grantor’s children, avoiding a layer of estate tax. Complex and heavily regulated by the federal GST tax.
Educational Trusts
Set up specifically to fund education for named beneficiaries. Distributions are typically restricted to tuition, books, and related expenses.
Properly administering a Trust — both during the Trustor’s lifetime and after death — is critical. Assets in a properly funded Trust can be quickly and simply transferred to the intended beneficiaries upon death, without the delay and expense of probate.
If You’re a Successor Trustee
Trust Administration Upon Death
If you currently serve as a Trustee, or are named as a Successor Trustee, you should obtain advice from qualified professionals familiar with current tax law, current developments in Trust law, and the administration of Trusts. Here’s the framework:
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01
Immediate review of the trust, will, and assets
Have a knowledgeable attorney review everything to determine any tax implications or requirements that are time-sensitive.
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02
Procure date-of-death values of all real property
These values establish the tax basis for the property going forward. We can help you obtain a defensible date-of-death valuation.
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03
Manage and protect the property
Maintain appropriate property and liability insurance, secure the home, and address any immediate maintenance issues before decisions about the sale are made.
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04
Prepare and record required affidavits
File the affidavits establishing you as Successor Trustee, notify the county assessor of the change in ownership resulting from the trustor’s death, and file the documents required to avoid property tax reassessment when applicable.
Not sure which type of trust you’re dealing with?
Bring us the trust document. We’ll help you understand what kind of trust it is, what authority it gives you, and what the next real estate step looks like. Consultations are free.
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