December 9, 2010

Creating a Trust

The following are the elements of a California revocable trust.  

1. A settlor (Prob C §15200);

The settlor is the person who creates the trust.

2. The settlor's intent to create a trust (Prob C §15201);

The person creating the trust must manifest their intent to create a trust in some tangible manner. For example, if ones write a revocable trust, one of the first paragraphs is typically a declaration of trust in which the settlor expresses their intention to create a trust.

3. Trust property (Prob C §15202);

Simply stated a trust needs to be comprised of some piece of property, whether person or real. Otherwise, no trust will exist. For instance, a trust can be comprised of a pencil, a car, a country estate or a substantial bank account. 

4. A trust beneficiary (Prob C §15205); and

The trust needs to identify an ascertainable beneficiary. For example, if you decide to leave your house to "your friends" in trust, the trust will fail. Regardless of a check of your Facebook page, no judge will be able to definitively figure out who is and who is not in fact "your friend." However, if you leave your property to "your first cousins" then a judge or whomever could ascertain the identities of these beneficiaries through an examination of a family tree.

5. A valid trust purpose (Prob C §§15203-15204);

A trust must have a purpose that is neither illicit nor against public policy. Prob C §15203. For instance, you cannot condition the receipt of an inheritance on the grounds that the beneficiary engage in a Ponzi scheme, divorce their spouse, defraud creditors, or distribute narcotics.