Family Wealth Trusts for Young Families in California and Washington

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

A family wealth trust is not one legal product. It is the usual name for a set of trusts that hold a family’s assets, decide who manages them if the parents die, and control when the children receive money. For a California or Washington family with young children, the core is almost always a funded revocable living trust with separate trust shares for the kids. Irrevocable trusts come later, only when a specific tax or control problem calls for them.

For a two-income household earning $750,000 to $3 million, the question is rarely federal estate tax. It is who raises the children, who runs the money, what a California probate court would cost, and whether an 18-year-old gets a seven-figure insurance payout with no strings.

What a young family’s trust actually has to do

Strip away the marketing and a family trust for parents of children under 12 has four jobs:

• Keep the estate out of probate. Assets titled in a revocable trust pass under the trust document, not through a court process. This matters most in California.
• Hold money for minors. A child under 18 cannot own an inherited brokerage account or life insurance payout outright. Without a trust, a court-supervised guardianship of the estate or a custodial account steps in, and custodial accounts usually end at 18 or 21.
• Separate the people. The guardian who raises your kids (named in your will) does not have to be the trustee who manages the money. Many families pick a sibling as guardian and a more financially minded friend, relative or professional as trustee.
• Set the rules. The trust says what the money can be used for (school, health, a first home) and at what ages the children get control.

Things a revocable trust does not do: it does not protect assets from the parents’ own creditors or lawsuits, it does not cut income tax (it reports under your Social Security number while you are alive), and on its own it does not reduce estate tax. Older articles, including the version of this page we used to publish, overstated those benefits.

The trust types, and which ones a W-2 family with young kids usually needs

When people search for the “Rockefeller trust structure”, they are usually describing the last two rows stacked over generations: irrevocable trusts with independent trustees, run by family governance rules. That machinery is real, but it is a later step. The first step for a family with a 4-year-old and a 7-year-old is the revocable trust and the children’s shares.

Why California families feel the probate cost most

California sets statutory fees for both the executor and the probate attorney. Each is paid on a sliding scale of the estate’s gross appraised value: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9 million and 0.5% of the next $15 million (Cal. Probate Code §10800 and §10810). The fee is figured on the gross value, so a mortgage does not reduce it.

Worked example: a Peninsula family with no trust

Assumptions: a married couple in San Mateo County, one a Genentech scientist and one a physician, household income $1.1 million. Two children, ages 4 and 7. A $3.2 million home with a $1.4 million mortgage, $1.8 million in a joint brokerage account and vested RSUs, $1.2 million in 401(k)s, and $4 million of term life insurance on each parent. They have wills but no trust, and the kids are named as contingent beneficiaries on the insurance.

If both parents die together, the home and brokerage account (gross value $5 million) go through probate. To keep the math simple, this treats them as one $5 million estate:

• Statutory executor fee: $4,000 + $3,000 + $16,000 + $40,000 (1% of the $4 million above $1 million) = $63,000
• Statutory attorney fee: the same $63,000
• Total before court costs, appraisal and any extraordinary fees: $126,000, on an estate with $3.6 million of net equity in those two assets

In practice, when spouses die together, half of the community property is generally administered in each spouse’s estate (Cal. Probate Code §103). Because the fee scale is front-loaded, two $2.5 million estates typically cost more in total than one $5 million estate, so the figure above is a floor, not a ceiling.

The 401(k)s and insurance skip probate because they have beneficiary designations, but that creates the second problem. Two children under 18 are named on $8 million of insurance. A court would generally need to supervise the money, or order it into a custodial account, until each child turns 18, and then each child receives their share outright.

With a funded revocable trust, the home and brokerage account are retitled to the trust, the insurance and (with care) the retirement accounts name the trust as contingent beneficiary, and the children’s trust shares hold everything with a trustee the parents chose. No statutory probate fee applies to assets already in the trust. Retirement accounts left to a trust need drafting that works with the inherited IRA payout rules, so that part belongs with the estate attorney.

Why Washington families need a trust for a different reason

Washington probate is generally simpler and cheaper than California’s, so the trust case there rests on estate tax. Washington’s exclusion is $3,076,000 for deaths from January 1 to June 30, 2026, and $3,000,000 for deaths from July 1 to December 31, 2026, with rates of 10% to 20% for deaths on or after July 1, 2026 (WA DOR estate tax tables). Unlike the federal system, Washington has no portability: “Washington law does not have, nor does it incorporate, the federal provisions of portability for estate tax” (WA DOR estate tax FAQ). A surviving spouse cannot use the first spouse’s unused exclusion.

Worked example: a Seattle family with $9 million

Assumptions: an Amazon executive and a spouse with a $9 million estate (home, RSUs, 401(k)s and an insurance policy they own personally), simple “everything to my spouse” wills, two children under 10, and both deaths after July 1, 2026.

• Without planning: the first death uses the marital deduction and no exclusion. At the second death, $9 million less the $3 million exclusion leaves about $6 million exposed to Washington estate tax.
• With a credit shelter trust: about $3 million goes into a trust for the surviving spouse and children at the first death, using that spouse’s exclusion. At the second death, roughly $6 million less $3 million leaves about $3 million exposed, half the amount.
• Moving the insurance into an ILIT can shrink the exposed amount further, because a policy the decedent owns is included in the Washington estate (WA DOR estate tax FAQ). A policy transferred within three years of death is generally still counted (IRC §2035), so this works best done early.

Growth inside the credit shelter trust also stays out of the survivor’s estate. The trade-off: assets in that trust do not get a second step-up in basis at the survivor’s death.

Federal estate tax is a smaller concern for most families at this stage. The federal basic exclusion is $15,000,000 per person for 2026, made permanent and indexed from 2027 (IRS). The claim that it “drops to about $7 million in 2026” is obsolete.

Community property: keep the double step-up

California and Washington are both community property states. When one spouse dies, the whole community property asset, including the survivor’s half, generally gets a new basis equal to its value at death, as long as at least half of the community property interest is included in the deceased spouse’s gross estate (IRS Publication 551). For a couple holding RSU shares with a low basis, that can wipe out years of built-in gain. A joint revocable trust should be drafted to keep community property identified as community property, so this benefit is not lost when assets are retitled.

Decisions the parents actually have to make

1. Guardian. Who raises the children. This goes in the will, not the trust.
2. Trustee. Who manages the money, and a backup. Consider splitting the role from the guardian.
3. Distribution ages. Common patterns are thirds at 25, 30 and 35, or money only for education, health and housing until a set age. California and Washington custodial accounts, by contrast, usually end at 18 or 21, though some transfers can be written to delay this to 25 (see what happens to a UTMA at 21).
4. Funding. Retitle the home and taxable accounts, and update beneficiary forms. An unfunded trust does nothing. See naming a trust as beneficiary of a brokerage account.
5. Washington only: whether the plan needs a credit shelter trust and an ILIT.

Common mistakes we see

• Signing the trust and never retitling the house or brokerage account.
• Leaving the children as direct beneficiaries on life insurance or a 401(k).
• Choosing a trustee because they are kind, not because they will read a statement and say no when needed.
• Not updating the plan after a move between California and Washington, a new child, or a large RSU vest.
• Expecting a revocable trust to shield assets from lawsuits or reduce income tax.

What to write down for your kids

A trust tells a trustee what is allowed. It does not tell a 25-year-old why you chose 25, or what you hoped the money would make possible. A short letter of wishes, kept with the trust and updated every few years, gives the trustee and your children that context: how you think about work, spending, risk and giving. As Kevin Luu puts it: “Your kids will inherit your money. Will they inherit your judgment?” This is the FamilyKnowledge® idea at the center of the Age Five Family Office™ work we do with families, and it is where the family governance side of the plan begins.

Frequently asked questions

Is a family trust worth it if our net worth is under $2 million?

In California, often yes. A home alone can push the gross estate into a probate fee in the tens of thousands, and the children’s trust shares matter at any net worth if you carry large life insurance. In Washington, the case is weaker at that level unless you want more control over when the children receive money than a custodial account allows, or you own property in California.

Who should be the trustee for young children?

Someone organized, available and willing to say no, plus a named successor. Many families name a trusted relative together with a professional or corporate co-trustee for larger estates. The trustee can be different from the guardian, which lets each person do the job they are suited to. See what a fiduciary trust is.

Does an irrevocable trust make sense for us now?

For most California families with young kids, not yet, because the federal exclusion is $15 million per person for 2026. Washington families above the $3 million state exclusion, and families expecting a liquidity event, are the usual exceptions. Irrevocable trusts are hard to change, so they deserve a specific reason.

Next step

Pull up the title on your home, the registration on your brokerage account and the beneficiary forms on your insurance and 401(k)s, and check whose name is on each. If none of them say “trustee”, you know where to start. An estate planning review, or a Tax & Wealth Assessment, can map what needs to change before you meet the attorney (see questions to ask an estate attorney). This article is general education, and the right structure depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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