Funding Your Trust
You’ve created your trust—congratulations! But wait, there’s more! Next, you’ll need to fully fund your trust. This is a very important step, but is one that is easy to overlook. An unfunded or partially funded trust may result in your estate ultimately needing to be probated, which you’ve worked so hard to avoid. Let’s discuss the importance of funding your trust!
Funding your trust simply means moving your assets into your trust. This requires that you physically change the titles from your name to the trust’s name. The documents used to do this will depend on the type of asset. For example, if you are moving a cash bank account into your trust, you’ll need to sign certain documents with your banking institution to retitle your account. If you are moving real property into your trust, you’ll need to execute a deed.
Let’s look at some examples to illustrate the importance of funding your trust. Mark and Amy are married and create a Revocable Trust to avoid future probate of their estate. They own in their own name a house, cash bank account, and stocks in a brokerage account. Mark and Amy fully fund their trust, meaning they properly changed the title on all of these assets to that of their trust. When Mark and Amy pass away, their estate will avoid probate.
On the other hand, John and Clara are married and also created a Revocable Trust as part of their estate plan. They own in their own name a farm, mineral interests, and a cash bank account. John and Clara however, only transferred their farm and bank account into their trust. When John and Clara pass away, the mineral interests in their estate will require probate. This is because their trust was not fully funded, as the mineral interests remained titled in their own name. Since their trust was underfunded, portions of their estate did not avoid probate.
Our firm provides our estate planning clients with detailed and personalized funding instructions, covering every asset to be placed in trust. We cannot overemphasize the importance of a fully funded trust!