California Trusts and Trust Law - Reasonable Alternatives to Trusts

Historically, one of the biggest selling points for having a trust in California has been to avoid probate and minimize or avoid taxes.  A popular myth is that having a trust always avoids probate and always avoids taxes.  It does not.  The fact of the matter is a trust is not always necessary or appropriate, especially in families that are very secure and loving.  The problem is today that it doesn't take much for a family dynamic to be disrupted, especially when it comes to money.

Here are some alternatives to probate other than creating a trust

a.       Joint Tenancy.  If you have no children and wish for your spouse to inherit your property, then you can hold your assets together as joint tenants and completely avoid probate.  If you have a child or children who get along then you can also name them as a joint tenant.  Keep in mind however that any joint tenant in California who holds title on real property can potentially force the sale of real property through a partition action – even if they only own a tiny amount of the real property interest. 

c.       Joint Account.  You can set up a joint financial account.  In multiparty account law in California a joint title holder to a financial account has free access to all the money in the jointly held account.  That does not mean the joint holder can legally take all the money and spend it, but good luck trying to get the money back once it is gone.  So in other words you better make darn sure you have no problem with the money disappearing and all going to the person you name on the joint account before you put them on.

d.      If you have less than $150,000 in total assets, then you can transfer assets by way of small estates transfers in California under Probate Code section 13100 et seq.

e.       You can gift away your money while you are alive.  If you are relatively well off, you can gift away up to $5.43 million total in your lifetime in 2015.  The estate tax beyond that would be 40%.

f.       You can gift away annually.  For 2015, you can gift away up to $14,000 without taking a hit against your lifetime gift exemption.

http://www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/

 

The reality is that your planning will depend on your situation, the risks you are willing to take, and your goals.  The above options are not exhaustive alternatives, but provide people with an idea of some of possible options out there for distributing their hard-earned money.