California Estate Law · Trust Funding
What Should Stay Out of Your California Living Trust?
Trust funding requires an asset-by-asset review, not a blanket instruction to transfer everything.
Match each asset to the right arrangement
Some assets belong in a revocable trust; others require beneficiary designations or a different transfer method. Ownership, tax treatment, and existing agreements determine which approach deserves review.
Retirement accounts and health savings accounts
These require individual ownership. Naming a trust as beneficiary is a separate decision, with consequences for distributions, control, and tax treatment.
Vehicles, insurance, and annuities
California offers alternative vehicle-transfer procedures. Insurance ownership and beneficiary designations serve different purposes; annuity ownership changes may trigger tax consequences.
Business interests and assets you do not own
Review shareholder eligibility and operating agreements before transferring business interests. Custodial gifts belong to the child; jointly held interests require separate analysis.
Homes, mortgages, and Medi-Cal
A mortgage does not automatically prevent trust funding, but protected transfers have conditions. Medi-Cal eligibility and estate recovery are different questions.
Community property and drafting
Married California owners should review property characterization. Trust language and deeds can affect tax basis treatment, particularly when documents were prepared elsewhere.
This article touches on
- Assets not suitable for blanket trust funding
- Individual retirement and employer retirement plans
- Health savings account ownership
- Trust as retirement account beneficiary
- Conduit versus accumulation trusts
- Vehicles and California alternative transfer procedures
- Insurance ownership versus beneficiary designation
- Irrevocable life insurance trusts
- Annuity ownership tax consequences
- S corporation shareholder eligibility and post-death elections
- LLC and partnership transfer restrictions
- Professional corporation ownership restrictions
- Custodial gifts and property not owned by the settlor
- Joint tenancy and survivorship
- Conditional mortgage due-on-sale protection for certain trust transfers
- Medi-Cal eligibility versus estate recovery
- Community property characterization and basis treatment
- Out-of-state and older trust drafting review