Living Trust vs. Testamentary Trust in California
Search “living trust California” and you’ll get a wall of estate planning ads — but the underlying legal distinction is simple. A living trust (the everyday name for an inter vivos trust) is created during the settlor’s lifetime. A testamentary trust is created inside a will and doesn’t take effect until the settlor dies and the will goes through probate.
Both are legitimate estate planning tools. The right choice — or the right combination — depends on cost, privacy, timing, and tax basis, and it’s a distinction the California Bar Exam tests directly under Trusts and Wills & Succession.
The Featured-Snippet Definition
An inter vivos (living) trust is created while the settlor is alive, through a declaration or deed of trust, and can be revocable or irrevocable. A testamentary trust is created by provision in a will and takes effect only after the settlor dies and the will is admitted to probate, per Cal. Prob. Code §§ 15200, 6110–6113.
How a Living Trust Works
A living trust is created one of two ways: a declaration of trust (the settlor names themselves trustee) or a deed of trust (the settlor transfers property to a separate trustee). Most California living trusts are revocable, letting the settlor amend or cancel them at will.
Living trusts take effect immediately, avoid probate for funded assets, and stay private — unlike a will, a living trust is never filed with the court and never becomes a public record.
How a Testamentary Trust Works
A testamentary trust exists only inside a will and must satisfy every Statute of Wills formality: a written document, signed by the testator, witnessed by at least two disinterested witnesses present at the same time (California requires two under Cal. Prob. Code § 6110). It is always irrevocable — once the testator dies, the will cannot be amended by the trustee or beneficiaries without court approval.
Because a testamentary trust only comes into being after probate, it can take six months to well over a year before the trustee actually has assets to manage.
Side-by-Side Comparison
| Feature | Living (Inter Vivos) Trust | Testamentary Trust |
|---|---|---|
| Created | During settlor’s life | In a will, effective at death |
| Formalities | Deed/declaration; writing needed only for real property | Full Statute of Wills formalities |
| Revocable? | Usually, unless drafted irrevocable | Never — always irrevocable |
| Probate | Avoided for funded assets | Required before it can operate |
| Privacy | Private document | Public record (filed with probate court) |
| Timing to fund | Immediate | Months to years after death |
The Step-Up in Basis Question
This is the part people setting up a living trust in California most often get wrong. Step-up in basis depends on whether property is included in the decedent’s gross estate, not on whether the trust is inter vivos or testamentary.
- A testamentary trust’s property passes through probate as part of the estate — it’s included in the gross estate and gets a full step-up in basis.
- A revocable living trust’s property is also included in the settlor’s gross estate (because the settlor retained the power to revoke) — so it gets the same step-up.
- Only property in a completed, irrevocable inter vivos trust is generally excluded from the gross estate — and it generally does not get a step-up, with narrow exceptions.
That’s why many California estate plans use a revocable living trust for the bulk of the estate (keeping the step-up and avoiding probate) and reserve irrevocable trusts for specific assets where estate-tax removal outweighs losing the basis step-up.
Probate Avoidance and Cost Trade-Offs
Living trusts cost more upfront — you need a deed of trust and you have to actually retitle assets into the trust (“funding” the trust), which many people skip and later regret. Testamentary trusts cost nothing extra beyond drafting the will, but their assets are frozen during probate and subject to probate fees.
Most California estate planning attorneys still recommend a properly funded revocable living trust for anyone who owns real property, precisely to avoid California’s often slow and costly probate process.
Worked Example
In 2020, Mark creates a revocable living trust and transfers his house and brokerage account into it. His will, drafted at the same time, contains a “pour-over” provision sending any leftover assets into the trust, plus a testamentary trust for his minor grandchildren funded from whatever passes through his estate.
Mark dies in 2026. The house and brokerage account, already titled in the trust’s name, avoid probate entirely and pass immediately under the trust terms. Any assets Mark forgot to retitle pour over through probate into the same trust. Separately, the testamentary trust for the grandchildren cannot begin operating until the will completes probate — a process that could easily take six to twelve months.
Common Mistakes to Avoid
- Assuming a living trust eliminates the need for a will. A pour-over will is still needed for any assets never transferred into the trust during life.
- Believing all living trusts avoid the step-up basis benefit. Only completed gifts to irrevocable trusts risk losing the step-up; revocable trusts keep it.
- Thinking a testamentary trust can be revoked after death. It cannot — once the testator dies, the trust (like the will) is locked in.
FAQ
Is a living trust the same as a revocable trust?
Not exactly — “living” (inter vivos) describes when the trust is created (during life), while “revocable” describes whether the settlor can cancel it. Most living trusts are revocable, but a living trust can also be made irrevocable.
Does a living trust avoid California probate completely?
Only for assets actually retitled into the trust’s name. Anything left in the settlor’s individual name at death typically still requires probate, unless it passes through a pour-over will into the trust or by other non-probate transfer.
Can a testamentary trust be created without a valid will?
No. A testamentary trust exists only as a provision within a validly executed will. If the will fails for lack of formalities, the testamentary trust fails with it.
Key Takeaways
- A living (inter vivos) trust is created during life; a testamentary trust is created inside a will and starts only after probate.
- Testamentary trusts must satisfy full Statute of Wills formalities and are always irrevocable.
- Step-up in basis depends on inclusion in the gross estate — both testamentary trusts and revocable living trusts qualify; irrevocable inter vivos trusts generally do not.
- Living trusts avoid probate and stay private; testamentary trusts are filed publicly and delayed by probate.
- A pour-over will typically backstops a living trust for any assets never formally transferred into it.
This article is educational and is not legal advice. Consult a licensed California attorney about your situation.
Related guides
- Revocable vs. Irrevocable Trust in California Explained
- Will Execution Requirements
- Pour-Over Wills in California
- Probate Process in California