Benefits for NonCitizen Grantors

I recently received a frantic call from Vincent. He’s a successful software entrepreneur, originally from Germany, and a long-time California resident. He’d meticulously drafted a codicil to his existing Living Trust, intending to add a substantial charitable bequest. Unfortunately, he signed it… but never actually funded it. He’d meticulously updated the beneficiaries, the trustee, and the specific charitable organizations, but the accounts remained titled solely in his name. Now, facing a rapidly progressing illness, his family fears the codicil won’t be recognized, and the charitable donation—something deeply important to him—will be lost. The cost? Not just the potential loss of the significant donation, but the emotional distress of failing to fulfill a final wish.

What Happens If My Trust Isn’t Funded?

Vincent’s situation highlights a critical, often overlooked aspect of estate planning: funding your trust. A beautifully drafted trust document is, frankly, just a piece of paper until you legally transfer ownership of your assets into the trust’s name. As an attorney and CPA with over 35 years of experience here in Escondido, I see this mistake repeatedly. Many people believe simply signing the trust document is enough. It’s not. Under California Probate Code § 15200, a trust is not valid unless it holds identifiable property; signing the trust document is only step one—you must legally transfer assets (funding) to the trustee for the trust to exist.

Are There Unique Considerations for Non-Citizen Grantors?

Absolutely. While the core principles of estate planning remain consistent regardless of citizenship, non-citizen grantors often face additional complexities. For example, the interplay between U.S. estate tax laws and the laws of their home country can create unexpected consequences. A seemingly straightforward estate plan can become entangled in international tax treaties and probate procedures. This is where my CPA background provides a distinct advantage. I can analyze the potential step-up in basis for assets, forecast capital gains implications, and accurately value international holdings—all critical for minimizing tax liabilities and ensuring a smooth transfer of wealth.

How Does Revocability Affect My Ability to Change My Trust?

Most California trusts are revocable, meaning you retain the right to modify or terminate the trust during your lifetime. However, it’s crucial to understand the parameters of that revocability. Unless the trust instrument expressly states otherwise, Probate Code § 15400 presumes that all California trusts are revocable by the settlor, allowing you to amend, revoke, or restate the trust at any time while you have capacity. This flexibility is essential, particularly for non-citizens who may experience changes in their residency status or financial circumstances. Regularly reviewing your trust document—at least every three to five years, or when significant life events occur—is paramount.

What About Real Estate I Own Outside of the U.S.?

Transferring real estate, whether domestic or international, into your revocable trust requires careful attention. While transferring your home into your revocable trust does not trigger reassessment, the eventual distribution to your children will trigger a Prop 19 reassessment to current market value unless the child moves in as their primary residence within one year. This is especially important for properties located outside the U.S., as the valuation process can be more complex and subject to differing legal standards. Accurate appraisal and documentation are essential to avoid disputes with tax authorities.

What Happens If I Forget to Transfer an Asset to My Trust?

This is surprisingly common, and it’s why I always counsel clients to create a “safety net” for overlooked assets. For deaths on or after April 1, 2025, if a primary residence intended for the trust was accidentally left out (valued up to $750,000), it qualifies for a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). It’s critical to understand the distinction: this is a Petition (requiring a Judge’s Order), not a simple Small Estate Affidavit. The affidavit has a lower value threshold and is limited in scope. A Petition provides a more robust pathway for transferring assets outside of probate, even if they weren’t initially included in the trust.

How Will the New Estate Tax Laws Affect My Trust?

The landscape of federal estate tax is changing. Effective Jan 1, 2026, the OBBBA permanently set the Federal Estate Tax Exemption to $15 million per person, meaning the primary focus of most Living Trusts is now avoiding probate and protecting privacy, rather than minimizing federal taxes. While this is good news for many, it doesn’t negate the need for careful planning. Especially for non-citizens, understanding the interaction between U.S. estate tax laws and their home country’s laws is critical to avoid double taxation.

Are There Any Specific Concerns Regarding My Business Interests?

If you own an LLC or other business entity, it’s vital to address its ownership and transfer within your trust. As of March 2025, domestic U.S. LLCs held in a living trust are exempt from mandatory BOI reporting; however, trustees managing foreign-registered entities must still file updates with FinCEN within 30 days. Failure to comply can result in significant penalties. I help clients navigate these complexities, ensuring their business interests are protected and seamlessly transferred to their beneficiaries.

What About My Digital Assets—Emails, Photos, Cryptocurrency?

In today’s digital world, digital assets are a significant part of most estates. Without specific RUFADAA language (Probate Code § 870) in your trust, service providers like Apple, Google, and Coinbase can legally deny your successor trustee access to your digital photos, emails, and cryptocurrency. This can create significant hardship for your loved ones. I incorporate specific provisions into my clients’ trusts to grant access to these vital digital assets, ensuring a comprehensive and complete estate plan.

What determines whether a California trust settlement remains private or erupts into public litigation?

Success in trust administration depends on more than just the document; it requires active management of assets, precise accounting to beneficiaries, and careful navigation of tax rules. Whether dealing with a blended family or complex real estate, understanding the mechanics of trust law is the only way to ensure the grantor’s wishes survive scrutiny.

Ultimately, the success of a trust depends on the details—proper funding, clear terms, and a trustee willing to follow the rules. By anticipating friction points and documenting every step of the administration, fiduciaries can protect the estate and themselves from liability.

Verified Authority on California Trust Law

• Trust Validity (Probate Code § 15200): California Probate Code § 15200
  The foundational statute confirming that a trust requires property to be valid. This is the legal basis for the “funding” requirement—without transferring assets (deeds, accounts) into the trust, the document is legally empty.
• Revocability Presumption (Probate Code § 15400): California Probate Code § 15400
  Confirms that California trusts are presumed revocable unless stated otherwise. This grants the settlor the flexibility to change beneficiaries, trustees, or terms as life circumstances evolve.
• Primary Residence Succession (AB 2016): California Probate Code § 13151 (Petition for Succession)
  Effective April 1, 2025, this statute acts as a backup for funding errors. If a home (up to $750,000) is left out of the trust, this Petition avoids a full probate administration.
• Property Tax Reassessment (Prop 19): California State Board of Equalization (Prop 19)
  Essential for all trust creators. While the trust avoids probate, it does not automatically avoid property tax increases for heirs. Specific planning is required to navigate the “primary residence” requirement for children.
• Estate Tax Exemption (OBBBA): IRS Estate Tax Guidelines
  Reflects the OBBBA permanent increase to a $15 million per person exemption (effective Jan 1, 2026). This shifts the planning focus for most Californians from tax avoidance to asset protection and probate avoidance.
• Digital Asset Access (RUFADAA): California Probate Code § 870 (RUFADAA)
  Without this statutory authority included in your trust, your digital legacy (crypto, social media, cloud storage) may be permanently locked away from your family by service providers.