Revocable Living Trusts in California: Avoiding Probate and Keeping Control

For many Bay Area households, a revocable living trust is the centerpiece of an estate plan. Here is what it does, what it does not do, and why California's probate rules make it worth understanding.

Ask an estate planning attorney in Palo Alto or San Jose what most plans are built around, and the answer is usually a revocable living trust. The reason is less about taxes than process. California's court-supervised probate system is slow and expensive relative to many states, and a trust is the most common way to keep a family's assets out of it.

What probate costs in California

When someone dies owning assets in their own name above certain thresholds, those assets generally pass through probate. According to the California Courts self-help guide, formal probate typically takes 9 to 18 months, with a filing fee of $435 plus costs for publication, appraisal, and other administration. The larger expense is usually statutory compensation. Under Probate Code section 10810, the attorney's fee for ordinary services is 4% of the first $100,000 of the estate, 3% of the next $100,000, 2% of the next $800,000, and 1% of the next $9 million, and the executor is entitled to the same schedule.

Those percentages apply to the gross value of the estate, not the equity. Consider a hypothetical estate consisting of a $1.9 million Santa Clara County home with a $900,000 mortgage plus $100,000 in a brokerage account. The probate estate is valued at $2 million, so the statutory attorney fee would be $33,000, and the executor could claim another $33,000, before court costs; the mortgage does not reduce the calculation.

California offers simplified procedures for smaller estates. The Courts' simple transfer page notes that for deaths on or after April 1, 2025, a small estate affidavit is available for estates up to $208,850, and a separate petition can transfer a primary residence worth up to $750,000. With the median single-family home selling for roughly $1.9 million in Santa Clara County, most homeowners exceed those thresholds.

How a revocable living trust works

A revocable living trust is a legal container you create during your lifetime. You typically serve as trustee, retain full control, and can amend or revoke the trust at any time. Assets titled in the trust's name are no longer owned by you individually, so at your death they pass to your beneficiaries under the trust's terms without a court proceeding. A successor trustee you name steps in if you become incapacitated or die.

Because the trust is revocable, it is disregarded for income tax purposes while you are alive: you report income on your own return, and trust assets generally still receive a step-up in basis at death. A revocable trust does not by itself reduce estate taxes; with the federal exclusion at $15 million per person for 2026, estate tax is not the main concern for most households, and California has no state estate tax.

The funding problem

The most common failure with a living trust is not signing it but funding it. A trust only controls assets titled in its name or naming it as beneficiary. Real estate requires a recorded deed, and brokerage and bank accounts must be retitled. Retirement accounts and life insurance pass by beneficiary designation and should be coordinated with the trust, not retitled. Unvested RSUs and options cannot be transferred, and vested shares at a plan administrator may need to move to a trust-titled account. Assets left outside the trust may still require probate, though a "pour-over" will can direct them into the trust.

Costs and limitations to weigh

Drafting a trust-based plan in the Bay Area usually costs several thousand dollars, and it needs review after marriages, births, moves, and major wealth changes. Retitling a home into a trust does not trigger reassessment, but under Proposition 19 the parent-child reassessment exclusion now applies only to a family home used as the child's principal residence, with a $1 million cap over assessed value, whether or not the home passes through a trust. A trust also does not protect assets from your creditors during your life or replace powers of attorney and a health care directive.

A question of process, not just wealth

The case for a living trust in California rests mostly on avoiding delay, cost, and public court filings for a family already dealing with a loss. For a household with a home and investment accounts, that case is often strong, but the right structure depends on your circumstances. This article is educational only and is not legal, tax, or investment advice; consult a qualified estate planning attorney about your circumstances.

Important Disclosures

Important Disclosures: Propulsion Capital Management is an investment adviser registered with the State of California Department of Financial Protection and Innovation. Registration does not imply a certain level of skill or training. This article is provided for general informational and educational purposes only and does not constitute investment, tax, legal, or accounting advice, nor an offer or solicitation to buy or sell any security or to adopt any particular investment strategy. The information is believed to be accurate as of the date of publication but is subject to change without notice; tax laws and regulations change frequently and their application depends on individual facts and circumstances. Nothing herein should be relied upon as a substitute for personalized advice from a qualified professional. Investing involves risk, including the possible loss of principal, and past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss. Any examples are hypothetical, are for illustrative purposes only, and do not reflect the experience of any client. Links to third-party websites are provided for convenience; Propulsion Capital Management does not endorse, and is not responsible for, the content of third-party sites. Propulsion Capital Management does not provide tax or legal advice; please consult your tax adviser or attorney regarding your specific situation.