This article is intended for general informational purposes only and does not constitute legal advice. California law and tax rules are subject to change, nuance, and interpretation beyond the scope of this article. Readers should consult qualified legal counsel and tax professionals regarding their specific circumstances.

Most people know they should have an estate plan. Far fewer actually have one — and those who do often don’t fully understand what they’ve signed. Estate planning doesn’t have to be mysterious. At its core, it’s about making deliberate decisions now so that your assets go where you intend, your loved ones are protected, and your wishes are honored if you can no longer speak for yourself.

This article series walks through the essential aspects of California estate planning. In Part 1 of 3, we discuss wills and trusts. Part 2 of 3 will cover incapacity documents as well as probate and how to avoid it. Part 3 of 3 will go over the tax landscape.

Wills: The Foundation of Any Estate Plan

A will is a legal document that expresses your wishes regarding the distribution of your property and, if you have minor children, the appointment of a guardian. Every adult should have one, regardless of the size of their estate.

Testate vs. Intestate

When someone dies with a valid will, they are said to die “testate.” The will is admitted to probate where applicable, an executor is appointed, and the decedent’s dispositive instructions and other wishes are honored. When someone dies without a will — “intestate” — California’s intestate succession statutes (Probate Code §§ 6400 and 8460 et seq.) govern who receives what, regardless of what the decedent may have intended. The court appoints an administrator, and the distribution follows a fixed hierarchy that may not align with your wishes.

Types of Wills

In practice, California estate plans typically involve one of two types of wills:

• Stand-Alone Will: A traditional will that names an executor and specifies how assets are to be distributed among beneficiaries. This is appropriate for individuals who do not have a revocable trust.

• Pour-Over Will: Used in conjunction with a revocable trust, a pour-over will acts as a safety net. Any assets that were not transferred into the trust during the decedent’s lifetime “pour over” into the trust at death to be administered according to its terms. The will names an executor but generally does not include specific distribution provisions, deferring instead to the trust.

What a Well-Drafted Will Should Include

Beyond the basics of naming an executor and specifying distribution, a comprehensive will should address:

• Whether the executor is required to post bond (or whether that requirement should be waived)

• The executor’s powers, including a statement invoking authority under California’s Independent Administration of Estates Act, which allows the executor to handle many routine transactions without court approval

• A statement of family identifying the testator’s spouse and children

• A no-contest clause, which discourages beneficiaries from challenging the will by providing that a contestant who fails to prevail forfeits their bequest

Guardianship Nomination

If you have minor children, your will can nominate a guardian. California distinguishes between two types of guardianship:

• Guardianship of the Person: Covers the day-to-day care, custody, and upbringing of the child.

• Guardianship of the Estate: Manages the child’s financial assets until they reach adulthood.

Trusts: Flexible, Private, and Probate-Free

A trust is a legal arrangement in which one party (the trustee) holds and manages assets for the benefit of another party (the beneficiary). The person who creates the trust — the settlor or grantor — transfers assets to the trustee, who administers them according to the terms of the trust document. If the settlor is also the trustee, the trust is said to be self-settled.

Under California Probate Code § 15200, a trust may be created by declaration, by lifetime transfer of property to a trustee, by testamentary transfer through a will, by exercise of a power of appointment, or by an enforceable promise to create a trust.

Revocable Living Trusts

The revocable living trust is the workhorse of California estate planning. During the settlor’s lifetime, they typically serve as their own trustee and retain the power to amend, revoke, or dissolve the trust at any time. Upon death or incapacity, a successor trustee steps in to manage or distribute the assets.

The advantages are substantial:

• Probate Avoidance: Assets held in the trust at death pass directly to beneficiaries without court involvement.

• Conservatorship Avoidance: A properly funded trust can eliminate or reduce the need for a court-supervised conservatorship if the settlor becomes incapacitated.

• Planning: Allows for estate, income, and property planning and ensures the settlor’s wishes are carried out.

• Privacy: Unlike probate, which is a public proceeding, trust administration is private.

• Flexibility: Trusts can accommodate complex family dynamics, staggered distributions, and a wide range of tax planning strategies.

The disadvantages are also worth noting: revocable trusts generally offer no protection from the settlor’s creditors during their lifetime, they require ongoing administration and asset titling, and they can be contested.

Common Trust Structures for Married Couples

Married couples have several trust structures available to them, each with different administrative and tax implications:

• Survivor’s Trust (or Disclaimer Trust): The simplest structure. After the first spouse dies, the surviving spouse retains full control of the trust, which remains revocable and amendable. No separate tax filings are required unless assets are disclaimed.

• AB Trust (Survivor’s Trust + Bypass Trust): Upon the death of the first spouse, the trust bifurcates. The Bypass Trust (also called a Decedent’s Trust or Exemption Trust) holds assets up to the deceased spouse’s estate tax exemption and becomes irrevocable. It requires a separate EIN and income tax returns. The Survivor’s Trust holds the remaining assets and remains revocable. While this structure was popular when estate tax exemptions were lower, it creates significant ongoing administrative complexity.

• ABC Trust (Survivor’s, Bypass, and Marital Trust): Used when a couple’s combined estate exceeds the applicable exemption. The Marital Trust holds any excess over the Bypass Trust threshold, also becomes irrevocable, and defers federal estate tax until the surviving spouse’s death. All assets in the Marital Trust are included in the survivor’s taxable estate.

Irrevocable Trusts

Unlike revocable trusts, an irrevocable trust generally cannot be amended or revoked once created. In exchange for giving up control, the settlor typically achieves estate tax reduction and asset protection. Irrevocable trusts are used to remove assets from the settlor’s taxable estate, protect assets from creditors, and lock in the current value and control structure of a portfolio for future generations.

Funding the Trust

A trust that is not properly funded is an expensive piece of paper. Assets must be retitled in the name of the trust — typically in the form “[Trustee Name], Trustee of the [Trust Name] dated [Date]” — for the trust to function as intended. Unfunded trusts may require assets to pass through probate, defeating the primary purpose of the planning. A Trustee Certification of Trust allows a trustee to provide third parties (such as banks) with evidence of the trust’s existence and the trustee’s authority without disclosing the full trust document, preserving privacy while facilitating account transfers.

Common assets that should be transferred to the trust include:

• Real property (via deed, which must be recorded)

• Bank and brokerage accounts

• Business interests (via assignment of ownership)

• Personal property (via general assignment)

Note that certain assets — such as vehicles, retirement accounts, and life insurance policies — are typically not transferred into a revocable trust and instead pass by beneficiary designation or other nonprobate mechanisms.

We now have an overview of wills and trusts. In the next article, we will elaborate on other aspects of estate planning, namely incapacity documents as well as probate and how to avoid it. Come back soon to read the next article!

Please reach out to us at admin@petrulisfs.com if you need fiduciary support.

This article is intended for general informational purposes only and does not constitute legal advice. California law and tax rules are subject to change, nuance, and interpretation beyond the scope of this article. Readers should consult qualified legal counsel and tax professionals regarding their specific circumstances.