You own a house, maybe a rental or two, and a car that’s finally paid off. Somewhere along the way you picked up the idea that living trusts are for people with beach houses and family offices. Jason Gaudy, an estate planning attorney at Gaudy Law in Upland, California, spends roughly half his practice cleaning up after that assumption.
Is a living trust really for people who aren’t wealthy?
Gaudy has been practicing for 23 years and his firm works with about 30 families a month. Asked what people’s real choices are when nobody plans, his answer starts with a number: “for the vast majority of people, I’d say 99% of people, a living trust is the centerpiece of what a plan should look like.”
He draws the range deliberately. Someone with a house, a few dollars in the bank, and a car. Someone worth $10 to $20 million. Someone with more than that. In his telling, net worth is not the thing that decides whether the document makes sense: it decides how complicated the document gets.
If anything, he says the reluctance runs in the opposite direction from what people assume. In his experience, the wealthier the client, the less they want to sit down and talk about what happens after they’re gone.
What is a revocable living trust, in plain English?
A trust is a legal container. You create it while you’re alive, retitle your assets into it, and usually serve as your own trustee, so day-to-day nothing feels different. You name a successor trustee, who takes over managing and distributing everything when you die or become incapacitated.
Revocable means what it sounds like. Gaudy defines it simply: you can amend it, or you can get rid of it entirely. That flexibility is exactly why he says most people should not be shopping for an irrevocable trust. He also notes the irony that every revocable trust becomes irrevocable the moment the person dies. At that point it can’t be changed by anyone.
What actually happens if you skip it?
Without a trust-based plan, the estate is likely headed for probate, the court-supervised process for retitling a dead person’s assets. Gaudy’s short description: it’s expensive, it takes a long time, it drags the process out, and it’s public. The cost and calendar are worth their own discussion, which we cover in probate vs. trust and what it really costs.
There’s also a California-specific wrinkle. In probate, Gaudy’s firm has to send notice to public agencies, including the state Department of Health Care Services, to find out whether the person was on Medi-Cal. In certain circumstances that agency can file a claim against the estate to be repaid. He says it doesn’t happen often, but he has seen claims as high as around $60,000. His reading of the state’s published guidance is that if the property isn’t in the estate, the agency generally can’t reach it. In practice, property held in a trust usually stays out of range. This is California law; other states run their own Medicaid estate recovery programs with different rules.
Doesn’t a larger estate need something more sophisticated?
Sometimes, but later than people think. Gaudy says clients regularly arrive asking for Nevada or Wyoming structures, and his first question is whether they’ve done the basic framework trust yet. Irrevocable life insurance trusts, he notes, are typically estate tax devices, and with the federal exemption around $15 million per person, most estates simply don’t land in that category.
Past roughly $20 to $30 million, when someone is genuinely willing to give up control of some assets, he says there are good options and firms he refers to. Short of that, his view is blunt: “there’s just nothing better than the revocable living trust.”
Where do LLCs fit if you own rentals?
A revocable trust does not give you asset protection, because you still control everything in it. That’s the tradeoff for being able to change it. The structure Gaudy uses for investment property is layered: the LLC owns, rents, and operates the property, and the trust owns the LLC. The LLC isolates liability while you’re alive; the trust keeps the whole thing out of probate when you die.
He’s candid about the costs. A California LLC carries the $800 annual tax, plus a separate tax ID number and bank account. He tells clients to run it past their CPA first, since sometimes the better move is simply good insurance.
What this means if you’re planning a 1031 exchange
A 1031 exchange answers the tax question. It doesn’t answer the ownership question. Whatever you exchange into (another building, or a fractional interest such as a DST) still has to be titled somewhere, and Gaudy’s position is that the revocable trust is the container that keeps it from landing in front of a judge. If you’re at the stage of comparing replacement property structures, start with our guide to DSTs or the plain-English version of what a DST is. If your plan is already written, it’s also worth reading why trusts go stale.
Watch: Why Almost Everyone Needs a Revocable Living Trust, Not Just the Wealthy with Jason Gaudy, Gaudy Law
Educational only. Not legal, tax, or investment advice. Jason Gaudy is licensed in California; rules vary by state. Consult your own advisors.