By Todd Shea
2023 President
Santa Barbara Association of Realtors

Transferring property ownership to a trust is one of California’s most popular estate planning techniques. Here in the Santa Barbara area, many of the homes we come across as REALTORS® are owned in a trust. A trustee is tasked with overseeing the management of the assets held by a trust on behalf of beneficiaries. In California, having assets in a trust has several advantages, such as avoiding probate, maintaining privacy, offering asset protection, allowing for flexibility, offering tax advantages, and guaranteeing continuity of management.

Eliminating Probate

The ability to sidestep the probate process is one of the main advantages of holding assets in a trust. When a property owner passes away, their assets become subject to probate, a procedure for dispersing assets to heirs or beneficiaries that is governed by the court. Having a trust in place can help avoid going through the time-consuming and expensive process of probate. When a trust is established, the property is given to the trust, and the trustee is in charge of overseeing and allocating the assets in accordance with the conditions of the trust agreement. Beneficiaries may save time and money by doing this.

Maintaining Privacy

Unlike the probate process, which is a matter of public record, a trust allows for privacy in the distribution of assets. Since the trust document is not a matter of public record, the distribution of assets can be kept confidential. This can be particularly important for individuals who value their privacy or who have sensitive family situations that they want to keep private.

Protection of Assets

In the case of litigation or a creditor claim, a trust can preserve assets. Due to the fact that the trust is a separate legal body and the assets held inside are not regarded as a part of the individual’s personal assets, this is the case. In a trust, the property is shielded from liens and court orders directed at the individual owner. People who are at risk of being sued or who have significant assets they want to protect may find this to be especially crucial.

Making Room for Flexibility

Asset distribution to recipients is flexible thanks to trusts. The trust document may stipulate how and when assets are allocated according to certain circumstances. A trust may, for instance, provide that distributions be made gradually over time or only in specified circumstances. This might be especially crucial for people who have unusual family situations or wish to make sure that their assets are dispersed in a specific way.

Providing Tax Benefits

A trust can provide tax benefits to property owners. For example, a revocable trust can help avoid estate taxes and capital gains taxes by allowing for a step-up in basis at the time of the property owner’s death. This means that the property’s value is adjusted to its fair market value at the time of the property owner’s death, which can reduce or eliminate capital gains taxes if the property is sold. Additionally, a trust can help minimize estate taxes by allowing property owners to transfer assets to their beneficiaries outside of the probate process.

Ensuring Continuity of Management

A trust can ensure that the property is managed and distributed according to the property owner’s wishes. The trustee appointed to manage the trust will have the authority to manage and distribute assets according to the trust document, even after the property owner’s death. This can provide peace of mind for property owners, knowing that their assets will be managed and distributed according to their wishes.

As you can see, having properties in a trust in California can provide several benefits. Most importantly, start with reaching out to your local REALTOR®, who can assist in answering more questions and connecting you with a great estate planning attorney. Getting a trust set up is something that can be done by some great local professionals here in town. It’s important to work with a qualified estate planning attorney to determine if a trust is a right option for your individual circumstances. It is well worth exploring these options if you are a property owner here in Santa Barbara. 

Todd Shea is the 2023 president of the Santa Barbara Association of Realtors (SBAOR). He is a California licensed real estate agent with the Zia Group powered by eXp Realty here in Santa Barbara. He has served on and chaired several committees within the SBAOR and served on its board of directors. Todd can be reached at 805.453.7730 and or message and follow @toddshearealtor on Instagram. 


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