Why Most Californians Need a Trust (and How to Avoid Common Mistakes)

Why Most Californians Need a Trust (and How to Avoid Common Mistakes)

Episode Summary

Estate planning attorney Rebecca Goldfarb explains who in California should have a trust, why a trust is only one part of a complete plan, and the most common errors that derail families—often even when a trust already exists. We also cover special needs trusts, trustee selection, trust administration, probate hassles, and how to keep inheritances truly separate property for adult children.

Key Takeaways

• A trust is one piece of a comprehensive estate plan (trust + powers of attorney + advance healthcare directive + correct asset titling/beneficiaries).
• Who should have a trust (CA):
• Parents with minor or young-adult beneficiaries (keep in mind that frontal lobe maturity is roughly 28–30+; use staggered distributions).
• Anyone with special needs beneficiaries (preserve public benefits with a special needs trust).
• Those with asset amounts that could trigger probate (a trust avoids court).
• Blended/complex families (prevent conflict with clear, detailed terms).
• Owning real estate is not required—trusts still make sense if other conditions apply.
• The sobering stat: Even among people who have trusts, very few plans actually (1) honor wishes, (2) avoid court, and (3) maintain family harmony—usually due to poor drafting, no funding, or lack of follow-through.
  
  
• Biggest mistakes Rebecca sees:
• Unfunded trusts (assets never retitled to the trust; schedules at the back of a trust are not proof of funding).
• Wrong trustees / co-trustees (some institutions won’t accept co-trustees; pick capable, organized, neutral people).
• Outdated “AB split” language that auto-splits at first death without discussion—can freeze assets, create tax/admin headaches, and contradict the couple’s actual intent.
• Vague life-estate clauses (who pays insurance, taxes, deductibles, repairs? spell it out).
• Handwritten edits on the original trust (don’t do this—creates ambiguity and court fights).
  
  
• Trust administration basics (after death):
• Send 120-day notices before distributing funds; early payouts can bankroll a contest against you.
• Do a proper accounting and hold a reserve (taxes, reassessments, supplements).
• Communicate with beneficiaries to reduce anxiety and litigation risk.
  
  
• Special Needs Trusts:
  
  
• Use to preserve public benefits.
• Either standalone (irrevocable; others can contribute) or “birthed” from your main trust at death (revocable until then).
• Name long-term trustees + a way to appoint successors without court.
  
  
• Protecting your child’s inheritance:
  
  
• Inheritances are separate property by law, but routine commingling (e.g., paying mortgage from marital earnings) can convert them.
  
  
• Consider requiring a prenup/postnup in the trust (education + clarity; reduces future conflict).
  
  
  

Practical Tips You Can Use This Week

• Fund the trust: retitle real estate; update beneficiaries to the trust (where appropriate); confirm how each asset will pass.
• Add/video area: Durable Power of Attorney and Advance Healthcare Directive for each spouse/partner.
• Review every ~5 years or after life events (marriage/divorce, new child, death, move, major asset change).
• For real estate sales inside a trust: Trustees must act as prudent investors. “As-is” vs. renovate depends on risk tolerance, timeline, beneficiary dynamics, and clear documentation (consider date-of-death appraisal).
• Check unclaimed property (periodically search CA’s database for you and your family).
  
  

Memorable Lines

• “A successful estate plan should honor your wishes, avoid court, and maintain family harmony—most plans we review don’t hit all three.”
• “A schedule at the back of your trust is just a snapshot—not proof your trust is funded.”

Resources & Contact

• Goldfarb & Luu (Firm): goldfarbluu.com
  
   (Estate planning, special needs trusts, elder law. Site includes contact info and phone numbers.)