A living trust is an excellent tool for estate planning. Think of it like a treasure chest – we build it and provide you with a couple of keys to the lock. But an empty treasure chest is essentially worthless. The same can be said for an unfunded living trust. Whether you have an existing trust or you are thinking about setting up a trust, don’t ignore the funding process. Funding is the number one most critical, yet often overlooked, final step in your estate planning journey.

 

 

What Does It Mean to Fund a Trust?

Funding a trust simply means transferring ownership of your assets into the trust’s name. This process varies depending on the type of asset but generally involves moving accounts, reassigning ownership of property, or designating the trust as a beneficiary where applicable. Essentially, any assets not titled in the name of the trust will not be governed by its terms, potentially leading to complications in estate administration and unwanted probate proceedings.

 

How Is My Trust Funded?

The method of funding a trust depends on the asset type. Here are some common examples:

Real Estate: A new deed must be prepared to transfer real estate into the trust. This often requires recording the deed with the appropriate local government authority.

Bank Accounts: Many financial institutions allow you to retitle checking, savings, and investment accounts in the name of the trust.

Retirement Accounts & Life Insurance Policies: While these accounts are typically not retitled into the trust’s name, you can update the beneficiary designation to ensure proceeds pass to the trust upon your passing.

Personal Property: High-value assets such as jewelry, art, or collectibles may need an assignment of ownership to the trust.

Business Interests: If you own shares in a business or have a membership interest in an LLC, legal documents may need to be amended to reflect the trust as the owner.

 

Proper Trust Funding Is Essential

Failing to fund your trust means your assets may be subject to probate—the very process many people seek to avoid with a trust. Additionally, unfunded assets might not be distributed according to your trust’s terms, leaving your beneficiaries to navigate complex legal processes and, potentially, costly court proceedings. In addition to the probate issue, an unfunded trust may lead to:

Loss of Control: The trust’s terms won’t apply to unfunded assets, meaning they may be distributed according to state laws rather than your wishes.

Increased Legal Fees and Taxes: Without proper funding, your estate may face unnecessary legal fees, creditor claims, and potential tax implications.

 

Ensuring Your Trust Is Fully Funded

The best way to ensure your trust is fully funded is to work closely with an experienced estate planning attorney. At JMS Law we take a comprehensive approach to estate planning, ensuring that your trust is not only properly drafted but also properly funded. Creating a trust is a multi-step process. The first step is our consultation, during which we will flush out all of the concerns and issues you have in order to create the best plan for you. We will ask you to compile information about your assets, including what the asset is, where it is located, its present value and its ownership. The next step is the plan development. We work closely with the clients to ensure all of their concerns are addressed and all of the information in the documents is correct. Next comes the final review and signing of your plan documents. Finally, we assist you in the transfer of your assets into your trust. To get the process started click the link below.