What are the elements of a valid trust?

 In Blog, Estate Planning

Not all trusts are valid. The law in California requires specific elements be met for a trust to earn its validity. It might sound like a mere academic discussion, but these requirements can have real world consequences if your trust does not meet all of these elements.

What is a trust?

A trust is essentially a fiduciary arrangement where someone holds property for the benefit of someone else. One of the most common forms of trust is the revocable living trust.

Intent

First off, there must be intent to create a trust. This is usually expressed in the initial provisions of the trust document. The person who creates the trust is the settlor.

Trust Property

The trust must hold property to be valid. If there is no property, the trust will fail. In a revocable living trust, there is usually a list of assets owned by the trust (“Schedule A”) as well as formal retitling of those assets as necessary (i.e., transfer deeds for real property).

Trust Purpose

This can be anything that is not illegal or against public policy. Again, with a RLT, this is usually spelled out early in the trust document.

A beneficiary

The trust must have a beneficiary (or beneficiaries) for whose benefit the trust exists. When the settlor first sets up the trust, the settlor is usually the initial beneficiary.

Legal capacity

The settlor must have legal capacity (i.e., sufficient mental capacity) to create a valid trust. This also generally means they must be at least 18 years of age.

Written instrument

If real property is involved, there generally must be a written, signed document.

What happens if an element is missing?

If an element is missing, the trust is generally invalid or void. For instance, if the settlor lacked capacity at the time of execution, then the trust is invalid. Sometimes, settlors fail to “fund” the trust once it’s set up. This will also cause the trust to fail, as there is no property held by the trust.

This is one of many reasons why it is recommended to have an attorney draft your trust, rather than drafting it on your own, or using an online service. An attorney will make sure every element is met, including making sure the property is funded and that all legal formalities are followed when the trust is executed.

Helix Law Firm can help with living trusts

Individuals and married couples should have a living trust to keep their property out of probate. We will draft a revocable living trust that fits your situation and will help you provide for your loved ones when you’re gone.

If you’re interested in learning more, please call us at (619) 567-4447 to schedule a free consultation.

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