If you’ve already taken the step of setting up a living trust or revocable trust—congratulations! That’s a wise and powerful move toward protecting your assets, avoiding probate, and preparing for the unexpected. But I need to tell you something that may come as a surprise: simply having a trust isn’t enough. You have to fund it.
Let me say that again—funding your living trust is absolutely critical. Without funding, your trust is just an empty document. It won’t help you avoid probate, it won’t protect you in the event of incapacity, and it certainly won’t make things easier for your heirs. So let’s talk about what funding a trust really means, why it matters so much, and how you can do it right—while you’re alive and competent.
What Does “Funding” a Trust Mean?
Funding a trust means transferring ownership of your assets into the name of your trust. This includes things like real estate, bank accounts, investment accounts, and personal property. If your trust isn’t funded, it holds no assets—and that means anything still in your individual name at the time of your death will go through probate.
Clients often come to me saying, “I’ve got a living trust,” and my first question is always, “What’s in it?” We’ll look at their checkbooks, and the accounts are still in their individual name. We’ll check the deed for their house, and it’s not in the trust either. That’s a major problem. Without funding, your trust can’t do what it’s designed to do.
Why Is Funding So Important?
One of the biggest reasons people create revocable living trusts is to avoid probate. Probate is a public, time-consuming, and often expensive court process that takes place after someone dies. If your assets are in a funded trust, they pass privately and efficiently to your heirs. If they’re not, you’ve lost most of the benefit of having the trust in the first place.
But probate isn’t the only reason to fund your trust. Proper funding also protects you in the event you become incapacitated. If your assets are already in your trust, your successor trustee can manage them without the need for a court-appointed guardian or conservator. That saves your family stress, time, and money.
How to Fund Your Trust
Let’s walk through the basics of how to fund your living trust. Real estate is a big one. If you own a home, you need to deed it into the name of your trust. That means preparing and recording a new deed—something our office often takes care of when we create a trust for a client.
Next, you need to take care of your financial accounts. Go to your bank or investment advisor and tell them you want to retitle your accounts in the name of your trust. Be prepared—some institutions may ask you to open a new account, even though the IRS doesn’t require a separate tax ID number for your revocable trust. It’s a hassle, but it’s worth doing to make sure your trust is properly funded.
When it comes to personal property—your furniture, jewelry, tools, firearms—we typically do a blanket assignment that says everything is transferred into the trust. Simple, effective, and legally binding.
What NOT to Fund Without Professional Advice
Now, a word of caution. Some assets shouldn’t be transferred into your trust without expert advice. I’m talking about 401(k)s, IRAs, and other retirement accounts. These pass by beneficiary designation and can trigger significant tax consequences if you mishandle them. Never fund your trust with retirement accounts without consulting a qualified attorney or tax advisor.
The same goes for business interests. If you own an LLC, S corporation, or have an operating agreement, transferring those interests into your trust can be tricky. There might be restrictions in place, and you’ll need to make sure everything complies with tax laws. Again, professional help is essential here.
Funding Keeps Your Wishes Intact
One thing many people don’t realize is that a trust isn’t a substitute for a will. You still need a pour-over will to catch any assets that weren’t transferred into your trust. But if you don’t fund your trust, your assets might pass through probate anyway—and that could mean your wishes aren’t carried out the way you intended.
Even worse, if you don’t have a will at all, the state will decide who gets your property. That’s called dying intestate, and it’s something a properly funded trust is meant to avoid.
Tips for Getting It Right
So, how do you stay on top of all this? Here are a few practical steps:
- Get organized. Make a list of all your assets—real estate, bank accounts, insurance policies, investments, personal property. Keep everything in one place, like a binder or a spiral notebook.
- Talk to professionals. Work with an estate planning attorney who understands trusts, probate, and tax law.
- Review annually. Life changes. Death, divorce, new assets, births—make sure your trust is still current and fully funded.
- Don’t forget the pour-over will. It’s your safety net in case something slips through the cracks.
The Bottom Line: Funding Makes Your Trust Work
Creating a living trust is a great step. But without funding, it’s just a fancy piece of paper. Funding your trust is what makes it effective. It keeps your estate out of probate, protects your privacy, ensures your wishes are carried out, and gives your family peace of mind.
Do it while you’re alive. Do it while you’re competent. Work with someone who knows what they’re doing. And never forget—funding is the key to making your living trust truly work for you and your loved ones.
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