While most estate plans begin with the execution of a Last Will and Testament, the average plan will continue to grow through the addition of various estate planning tools and strategies. Among the most popular of those additions is a trust agreement. In fact, it is not uncommon to have several trusts within a comprehensive estate plan. Given the popularity of trust agreements, the Los Angeles trust attorneys at Schomer Estate & Wealth Advisors discuss California trust laws to help you better understand what is required to create a valid trust in the state.
Creating a Valid California Trust
The fundamental concept of a trust is a legal arrangement that allows the trust creator (referred to as the “Settlor,” “Trustor,” or “Grantor”) to appoint a third-party (the “Trustee”) to manage, invest, and distribute assets intended to benefit a designated beneficiary or beneficiaries. Once established, a trust is a separate legal entity. Given the complex financial and legal nature of a trust, you should always work with an experienced trust attorney during the creation and administration of a trust. It helps, however, to familiarize yourself with some of California laws that govern the creation of a valid trust.
Trust Creation
Division 9, Part 2 of the California Probate Code governs the creation, validity, modification, and termination of a trust in the State of California. California law allows a valid trust to be created for any purpose that is not illegal or against public policy. A trust created for an indefinite or general purpose is not invalid for that reason if it can be determined with reasonable certainty that a particular use of the trust property comes within that purpose. A valid trust may be created in California by any of the following methods:
- A declaration by the owner of property that the owner holds the property as Trustee.
- A transfer of property by the owner during the owner’s lifetime to another person as Trustee.
- A transfer of property by the owner, by Will or by other instrument taking effect upon the death of the owner, to another person as Trustee.
- An exercise of a power of appointment to another person as Trustee.
- An enforceable promise to create a trust.
Elements Required to Create a Valid California Trust
California law requires the following three elements to be present to create a valid trust:
- The Settlor must properly manifest an intention to create a trust.
- There is trust property.
- There is a beneficiary (unless it is a charitable trust). Either of the following will satisfy the beneficiary requirement:
- A beneficiary or class of beneficiaries that is ascertainable with reasonable certainty or that is sufficiently described so it can be determined that some person meets the description or is within the class.
- A grant of a power to the Trustee or some other person to select the beneficiaries based on a standard or in the discretion of the Trustee or other person.
Requirements for a Trust Involving Real Property
If the trust owns or will own real property, such as a house, land, or commercial building, creation of a valid trust can only be accomplished by using one of the following methods:
- A written instrument signed by the Trustee, or by the Trustee’s agent if authorized in writing to do so.
- A written instrument conveying the trust property signed by the Settlor, or by the Settlor’s agent if authorized in writing to do so.
- By operation of law.
Can an Oral Trust Be Valid in California?
Your trust attorney will undoubtedly tell you that it is never wise to enter into a legal arrangement or agreement without a written document outlining the terms of the arrangement or agreement. Nevertheless, people do purport to create oral trusts sometimes. California law addresses the validity of an oral trust as follows:
- The existence and terms of an oral trust of personal property may be established only by clear and convincing evidence.
- The oral declaration of the Settlor, standing alone, is not sufficient evidence of the creation of a trust of personal property.
Are You Ready to Create Your California Trust?
For more information, please join us for an upcoming FREE seminar. If you are ready to get started creating your valid California trust, contact the experienced Los Angeles trust attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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