How do we answer question "5. We own the following interest in the above-declared homestead:" on CA homestead declaration?

Describe it EXACTLY as it is. There is no "right" answer. If it is in a Family Trust, the Trustee (Chapter 7 or Chapter 13 Trustee) will likely want to look at the trust and want to know what powers you have to sell the home. Describe in concise and precise detail what the ownership is, including future interests, etc. Hope that all makes sense. If it's a unique arrangement or you feel it's "different" simply describe it as you believe makes sense to a layman.

Yes, you should seek legal counsel

You need to hire an attorney and explain the situation. The trust suddenly makes your case very complicated. However, the 1st question is this; does the home have any equity? Is there a mortgage and is the home worth more than what is owed on the mortgage? If the answer is yes, you MUST hire an attorney because the home is potentially at risk. If the answer is no, you still need to hire an attorney, but if the home is upside down in value, there really isn't much risk. I can't speak specifically for CA's homestead exemption, but in general, since a trust is a separate legal entity, the debtor that resides in the home cannot claim the homestead exemption in bankruptcy. So the issue becomes, what interest does the debtor have in the trust and can the bankruptcy trustee pierce the trust. The answers to those questions depend on who and how the trust was formed, and the trust document.