California residents may want to include trusts in their estate plans whether they are wealthy or not. Trusts allow an estate to be settled without going through the costly and time-consuming probate process. Trusts can also be used to shield an owner's assets from creditors.
The trust does not necessarily have to reside in California but can be domiciled in another state. Nevada and Alaska rank high in order of states that provide the best asset protection. Nevada laws are favorable due to the lack of a state income tax. California's state income tax rate, which also applies to capital gains, ranges up to 13.3 percent. Nevada's laws also provide advantages in transferring funds for asset protection because of the short statute of limitations on fraudulent transfers.