The main types of trusts in California fall into two families: revocable trusts, which you can change or cancel while you’re alive, and irrevocable trusts, which you generally can’t. Within those families sit specialized structures built for particular goals — living trusts to skip probate, AB trusts for married couples with larger estates, spendthrift clauses to shield beneficiaries from creditors, special needs trusts to protect government benefits, charitable trusts to combine giving with tax planning, and testamentary trusts created by your will after death. All of them are governed by Division 9 of the California Probate Code.1Justia. California Probate Code Division 9 – Trust Law Which one fits you depends on what you’re trying to accomplish and how much control you’re willing to give up to get it.
Revocable Living Trusts
The revocable living trust is the workhorse of California estate planning. You create it during your lifetime, name yourself as trustee, and typically list yourself as the primary beneficiary. You keep full control while you’re alive: spending, selling, investing, and managing the assets however you see fit. Under California Probate Code Section 15400, a trust is presumed revocable unless the document says otherwise, so you can amend or cancel it at any time.2Justia. California Probate Code 15400-15414 – Modification and Termination of Trusts
The reason most Californians create one is to bypass probate. Because the trust holds title to your assets rather than you personally, those assets aren’t part of your probate estate when you die. A successor trustee you’ve named steps in, administers the trust privately, and distributes property to your beneficiaries without court involvement.
Probate avoidance carries real weight in this state. Under Probate Code Section 10810, the attorney for the personal representative is entitled to statutory fees calculated on the estate’s gross value: 4% on the first $100,000, 3% on the next $100,000, 2% on the next $800,000, 1% on the next $9 million, and 0.5% on the next $15 million.3California Legislative Information. California Code Probate Code – PROB 10810 The personal representative receives the same schedule on top of that, so the real cost roughly doubles. For a home and retirement accounts worth $1 million in gross value, combined statutory fees run about $46,000, before court filing fees and appraisals. Those costs disappear when assets sit in a properly funded revocable living trust.
Two limits catch people off guard. A revocable trust offers no creditor protection during your lifetime — Probate Code Section 18200 says trust property is fully exposed to your creditors as long as you hold the power to revoke.4California Legislative Information. California Probate Code 18200 And the IRS treats the assets as part of your taxable estate because you retained the power to alter or terminate the arrangement.5Office of the Law Revision Counsel. 26 USC 2038 – Revocable Transfers
Funding and Pour-Over Wills
Creating the document accomplishes nothing by itself. You have to retitle assets into the trust: deeds for real property, new account registrations for bank and brokerage accounts, updated beneficiary designations where appropriate. Skipping this step is the single most common mistake in California estate planning. Any asset left in your personal name still goes through probate.
A pour-over will is the safety net. It directs that any assets you forgot to transfer, or acquired after setting up the trust, get “poured into” the trust after your death. Those assets still must pass through probate first — the pour-over will doesn’t avoid it, it just makes sure leftover property ends up governed by your trust rather than by California’s default inheritance rules.
Irrevocable Trusts
An irrevocable trust is the opposite deal. You give up control in exchange for legal and tax benefits a revocable trust can’t deliver. Once you transfer property in, you generally can’t take it back, change the terms, or dissolve the trust on your own. Modification or termination typically requires the consent of all beneficiaries and a court petition, and the court will refuse if the change would undermine the trust’s core purpose.2Justia. California Probate Code 15400-15414 – Modification and Termination of Trusts
Because you no longer own or control the assets, they are generally excluded from your taxable estate for federal estate tax purposes. For 2026, the federal estate tax exemption is $15,000,000 per person.6Internal Revenue Service. Whats New – Estate and Gift Tax Federal estate tax planning therefore matters mainly for estates above that threshold, but the exemption has moved dramatically over the last decade and could move again, so irrevocable structures remain a fixture of high-net-worth planning.
The other major advantage is creditor protection. Assets inside an irrevocable trust are generally beyond the reach of your future creditors and legal judgments because you no longer own them. This makes irrevocable trusts popular with business owners, professionals in lawsuit-prone fields, and anyone focused on long-term asset preservation. Specific irrevocable forms include irrevocable life insurance trusts (which keep life insurance proceeds out of your taxable estate), charitable trusts, and special needs trusts, each described below.
AB Trusts for Married Couples
An AB trust, sometimes called a bypass or credit shelter trust, is built for married couples who want to maximize the amount of wealth that passes free of estate tax. When the first spouse dies, the couple’s assets split into two separate trusts. The “A” trust (the survivor’s trust) holds the surviving spouse’s share and remains fully revocable. The “B” trust (the bypass or decedent’s trust) holds the deceased spouse’s share in an irrevocable arrangement. The surviving spouse can receive income from the B trust and, in some cases, access principal for health, education, maintenance, or support, but the B trust’s assets stay out of the surviving spouse’s taxable estate when they later die.
AB trusts were essential when the federal exemption was much lower. With the 2026 exemption at $15 million per person, a married couple can shelter up to $30 million without one.6Internal Revenue Service. Whats New – Estate and Gift Tax They still serve a purpose for very wealthy families, for blended families where each spouse wants to lock in who ultimately receives their share, and as a hedge against future reductions in the exemption.
Spendthrift Trusts
A spendthrift trust protects a beneficiary’s inheritance from the beneficiary’s own creditors. California Probate Code Section 15300 says that if the trust document includes a spendthrift clause restricting a beneficiary’s ability to transfer their interest, creditors generally cannot seize that interest before the trustee actually distributes the money.7California Legislative Information. California Code Probate Code – PROB 15300 The same protection applies to the beneficiary’s interest in principal under Section 15301.8California Legislative Information. California Code Probate Code – PROB 15301
The protection isn’t absolute. California carves out exceptions for child support orders, spousal support, and certain government claims under Sections 15304 through 15307. Once money is actually distributed, it becomes the beneficiary’s personal asset and creditors can reach it normally. Even so, a spendthrift clause is cheap insurance and is a standard addition to most California irrevocable trusts.
Special Needs Trusts
A special needs trust holds assets for a person with a disability without disqualifying them from means-tested government benefits like Supplemental Security Income (SSI) and Medi-Cal. The trust must be designed so distributions supplement what the government provides rather than replace it. The trustee has sole discretion over when and how to distribute funds, and distributions typically go toward things like specialized medical equipment, recreation, or personal items that government programs don’t cover, never directly to the beneficiary as cash.
California recognizes two main varieties. A first-party special needs trust is funded with the disabled person’s own money, often from a personal injury settlement or an inheritance received outright. California Probate Code Section 3605 imposes a payback requirement: when the beneficiary dies or the trust terminates, the state can claim reimbursement for Medi-Cal and other public benefits it provided during the beneficiary’s lifetime, and those state claims are paid before any remaining assets go to other beneficiaries.9California Legislative Information. California Code Probate Code – PROB 3605
A third-party special needs trust is funded by someone other than the beneficiary, typically parents or grandparents. Because the money was never the beneficiary’s own asset, no Medicaid payback obligation applies when the trust ends. That makes third-party trusts the preferred vehicle for families planning ahead for a child or relative with a disability. In either case, drafting errors can be devastating; even a minor misstep in the distribution language can cause the beneficiary to lose benefits.
Charitable Trusts
Charitable trusts let you split your generosity between a charity and your family, with tax advantages on both sides. The two main structures are mirror images.
Charitable Remainder Trusts
A charitable remainder trust pays an income stream to you or another non-charitable beneficiary for a set number of years or for life. When the payment term ends, whatever remains goes to one or more qualified charities. You get a partial income tax deduction in the year you fund the trust, the trust itself is tax-exempt, and the charity eventually receives the remainder.10Internal Revenue Service. Charitable Remainder Trusts This structure appeals to people who want to convert a highly appreciated asset into a lifetime income stream without an immediate capital gains hit.
Charitable Lead Trusts
A charitable lead trust flips the order. The charity receives income from the trust for a set period, and when that period ends, the remaining assets transfer to your family or other non-charitable beneficiaries. The primary benefit is transfer tax reduction: because the charity gets paid first, the taxable value of the eventual gift to your family is discounted. Charitable lead trusts tend to work best in low-interest-rate environments, where the IRS’s present-value calculations make the remainder going to family look smaller on paper than it turns out to be.
Testamentary Trusts
A testamentary trust doesn’t exist during your lifetime. Instead, your will contains instructions to create the trust after your death. A common scenario: you have young children and want their inheritance managed by a trustee until they reach a certain age rather than handed to them outright at 18.
The critical downside is that every asset destined for the trust must first pass through California probate, with all the fees, delays, and public disclosure that involves. The will has to be validated by a court before the trust comes into existence. Once created, the testamentary trust becomes irrevocable — you’re no longer alive to change it — and the trustee administers it under the terms you set in your will.
Testamentary trusts made more sense before revocable living trusts became widespread. Today, most California estate planners recommend building sub-trusts for minor children directly into a living trust, which accomplishes the same delayed-distribution goal without probate. Testamentary trusts still appear in estate plans where a person already had a will and the estate is small enough that probate costs are manageable.
Matching the Trust to Your Goal
Deciding which type to use starts with what you’re trying to accomplish:
- Avoiding probate for a typical California estate: a funded revocable living trust, backed by a pour-over will.
- Removing assets from your taxable estate or shielding them from future creditors: an irrevocable trust, accepting the loss of control that comes with it.
- Married couple concerned about future changes to the estate tax exemption, or in a blended family: an AB structure.
- Beneficiary who is bad with money, going through a divorce, or facing lawsuits: add a spendthrift clause.
- Beneficiary with a disability receiving SSI or Medi-Cal: a special needs trust, first-party if funded with the beneficiary’s own money, third-party if funded by relatives.
- Charitable intent combined with income or tax planning: a charitable remainder or charitable lead trust.
- Basic minor-children provisions where you already have only a will: a testamentary trust, understanding the probate cost.
Many California estate plans layer several of these together. A revocable living trust can contain spendthrift clauses for adult beneficiaries, sub-trusts for minor children, and a special needs sub-trust for a disabled family member, all in one document.
Proposition 19 and Real Property in Any Trust
One rule sits outside the trust-type choice but affects every California trust that holds real estate. Proposition 19 changed the property tax rules for transferring real property through a trust. Before Prop 19, parents could transfer a primary residence and up to $1 million in assessed value of other real property to their children without triggering a property tax reassessment. That broad exclusion is gone.
Under current rules, a parent-to-child transfer of a primary residence avoids full reassessment only if the child uses the home as their own primary residence and files a homeowner’s exemption within one year of the transfer. Even then, if the home’s fair market value exceeds its current assessed value by more than $1 million, the property tax base is adjusted upward by that excess. Investment properties, vacation homes, and commercial real estate transferred through a trust are now reassessed at full market value with no exception. For families whose plan centers on passing down California real property, the choice of trust matters less than getting the Prop 19 mechanics right.