Family/Living Trust
Family/Living Trust is a contract that allows an individual to control his/her assets during their lifetime and after their incapacity or death through their chosen successor. The clients can decide how their assets are utilized if they lose capacity, to whom the assets can be distributed and at what point in time after their death; protection of their children’s inheritance; and probate avoidance. Our properly drafted Family/Living Trust will benefit you and your family.
A-B Trusts
A-B Trusts are for spouses as they have no application for single people. The A-B provisions come into active existence when a spouse dies. The Survivor’s Trust A is commonly remembered by the fact that the Surviving Spouse is Above ground, Trust A. The deceased spouse is Below ground hence, Trust B. The Trust estate is then split between the two Trusts by a formula. Practically speaking, each Trust receives one-half of the Community Property owned by the Living Trust and the Separate Property owned by each spouse. The formula limits funding Trust B up to the maximum of the FET exemption. As a result, the B Trust insures that the exemption amount for the decedent spouse is retained. Otherwise it would be lost on the death of the first spouse.
Protective Inheritance Trusts
It is a provision that makes giving inheritance to your children a condition. The condition being that the beneficiary is free of legal proceedings on your death, and if the beneficiary does not meet the condition, the inheritance will remain in your Living Trust protected from any lawsuits, divorces, or creditor claims. Another condition that is included is that the beneficiary establishes his/her own Sole and Separate Property Trust to receive the inheritance. This will allow the beneficiary to continue to keep his/her inheritance separate from his/her community property estate in a marriage.
Special Needs Trusts
Special Needs Trusts (SNT) are designed for disabled beneficiaries so as not to interrupt their Medi-Cal and/or S.S.I. benefits. These Trusts are ESSENTIAL for this purpose and some implementation for their arrangement should be provided for in the Family/Living Trust. There are two types of SNTs – a First Party Trust and a Third Party Trust. There is an important difference in the two which has to do with who gets the ultimate remainder of the Trust after the death of the disabled beneficiary.
Sole & Separate Property Trusts
The purpose of creating a Sole & Separate Property Trust is to gives sole ownership to the Trustor, which means the Trustor’s spouse would not be able to take ownership of the Trust. We recommend anyone who wants to have their assets, wills, and/or inheritance that was owned prior to a marriage to be separate from their spouse to create a Sole & Separate Property Trust.
What is a Family Living Trust and how does it work in California?
A family or Living Trust is a legal contract you create during your lifetime to hold and manage your assets. You transfer ownership of your property into the Trust, including your home, bank accounts, and investments, but you remain the Trustee and keep full control while you are alive and well. When you pass away or become incapacitated, a successor Trustee you named steps in to manage or distribute those assets according to your written instructions. In California, a properly funded Living Trust avoids probate entirely, keeps your estate private, and transfers assets to your beneficiaries without court delay or the percentage-based fees that probate requires.
Do I need a Living Trust, or is a will enough?
In California, a will alone typically means your estate goes through probate, a court-supervised process that can take 12 to 18 months and cost 4 to 8 percent of your estate’s gross value in statutory fees. For a San Diego home worth $1.2 million, that is $48,000 to $96,000 paid to attorneys and the court before your family sees a dollar. A properly funded Living Trust avoids probate entirely, transfers assets privately, and preserves the estate value your family deserves to receive.
What does ‘properly funded’ mean for a Living Trust?
A Trust only protects assets that are actually titled in its name. If you create a Trust document but leave your home and financial accounts in your personal name, those assets may still go through probate when you die. Funding is the process of retitling your property and accounts so they are owned by the Trust. At Stephens Law Group, Trust funding is part of the planning process. We handle deed transfers and coordinate with financial institutions so the Trust functions the way it is designed to from day one.
Can a Living Trust protect my child’s inheritance from divorce or lawsuits?
A standard Living Trust that distributes assets outright to children offers no protection once they receive the money. As an option, Stephens Law Group builds Protective Inheritance Trust provisions into family/Living Trust, ensuring a child’s inheritance is held in a protected structure at the time of distribution. The child retains full access to and control over the inheritance. The protection works in the background without restricting how the funds are used.
What happens to my Living Trust if I become incapacitated?
If you become incapacitated, your named successor Trustee steps in to manage your Trust assets without any court involvement. This avoids the need for a court-appointed conservatorship, which can take months and cost thousands of dollars in legal fees. Your Trust should also be coordinated with a Durable Power of Attorney for financial matters outside the Trust and an Advance Health Care Directive that governs your medical decisions. Together, these documents cover every aspect of incapacity planning.
Why a Living Trust Is the Foundation of Every Sound California Estate Plan
Most San Diego families come in with the same question: do I really need a Trust, or will a will be enough? For California homeowners, the answer is almost always that a Living Trust is the better choice.
When a person dies holding assets in their own name, those assets typically go through probate, California’s court-supervised process for transferring ownership to heirs. Probate is not a formality. It costs between 4 and 8 percent of your estate’s gross value in statutory attorney and executor fees, takes 12 to 18 months on average, and becomes part of the public record. For a San Diego family with a home worth $1.2 million and $200,000 in other assets, probate fees alone can consume $60,000 to $110,000 before your family sees a dollar.
A properly drafted and funded Living Trust transfers all of that outside of court. Assets pass directly to your named beneficiaries, privately and without court delay.
What a Family/Living Trust Actually Does
A Living Trust is a legal contract you create during your lifetime. You transfer ownership of your assets into the Trust, but remain the Trustee and keep full control while you are alive and well. You can buy and sell property, amend the Trust’s terms, add or remove beneficiaries, and revoke the Trust entirely if circumstances change.
At Stephens Law Group, every family/Living Trust goes well beyond basic probate avoidance. Each is designed to address the full range of risks a family could face:
Incapacity Planning
If you become incapacitated, your named successor Trustee steps in immediately without a court order or conservatorship proceeding. Your bills get paid, your assets are managed, and your family has legal authority to act without spending months petitioning a court for permission.
Inheritance Protection
A standard Living Trust that distributes assets outright to children offers no protection once they receive the money. Stephens Law Group builds Protective Inheritance Trust (PIT) provisions into every Living Trust, so that a child’s inheritance is held in a protected structure at the time of distribution. The child has full access to and use of the funds, but the inheritance is shielded from divorce proceedings, creditor claims, and lawsuits against the child or their spouse.
Special Needs Planning
If a beneficiary has a disability that qualifies them for Medi-Cal or SSI, a direct inheritance can disqualify them from those programs immediately. Proper planning coordinates the Living Trust with a standalone Special Needs Trust that preserves benefit eligibility while providing supplemental resources that improve the beneficiary’s quality of life.
Property Tax Preservation
California’s Proposition 19, effective February 2021, significantly tightened the rules for transferring property to children without triggering a property tax reassessment. Without the right Trust language, your children could face reassessment to current market value on the family home. Stephens Law Group builds distribution provisions to preserve every available exclusion.
Medi-Cal Protection
California can seek reimbursement from a Medi-Cal recipient’s estate after death, including a claim against the family home. Trust structure and estate planning can protect the home and ensure it passes to your children free of encumbrance.
What a Living Trust Does Not Do on Its Own
A Trust only protects assets that are titled in its name. Creating the Trust document is the first step. Funding it, retitling your real property, financial accounts, and other assets so they are owned by the Trust, is what makes it work.
At Stephens Law Group, funding is part of the estate planning engagement, not something left for clients to navigate on their own. We handle deed transfers for real property and provide specific instructions and coordination for financial accounts and investment portfolios.
A Complete Estate Plan Goes Beyond the Trust
A Living Trust is the centerpiece of a complete California estate plan, but it does not stand alone. A full plan includes a Pour-Over Will to capture any assets inadvertently left outside the Trust, a Durable Power of Attorney for financial matters outside the Trust during incapacity, and an Advance Health Care Directive that documents your medical preferences and designates someone to make treatment decisions when you cannot.
Stephens Law Group prepares specific attachments to the Advance Health Care Directive that allow you to document your own life support preferences while you are still competent, removing that burden from your family at the worst possible moment.
When to Create or Update Your Trust
The best time to create a Living Trust is before any crisis. If you have an existing Trust that has not been reviewed in several years, it may no longer reflect your family circumstances or current California law. Proposition 19, changes to the federal estate tax exemption, and updates to Medi-Cal recovery rules have all changed the planning landscape since many older Trusts were drafted.
Stephens Law Group reviews existing Trusts as part of the initial consultation, at no cost to new clients.
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