If you’ve worked with a lawyer to create a trust, you’ve probably heard this term before. “Funding your trust” is a common refrain for estate planning lawyers, mainly because so many clients fail to take this crucial step, creating problems for their poor trustee to deal with after their death.
So what does funding my trust mean?
Simply put, “funding your trust” means making the trust the legal owner of your assets. (Technically, the trustee is the owner and holds the assets “in trust,” but I’m keeping it simple to avoid confusion.) The trust is only in charge of the assets it owns, and everything else is still considered part of the estate and, therefore, not governed by the trust. In order for the trust to be effective, you need to update the title to your assets to make the trust the legal owner.
What happens if I don’t fund my trust?
That depends on how thorough you were when creating your estate plan (or how thorough your lawyer was). If you were thorough, then you either signed an “Assignment to Trust,” declaring all your assets trust assets, or you included a Schedule of Assets at the back of your trust listing everything you consider to be a trust asset (and yes, you can absolutely do both if you want to be an overachiever – that’s a good thing in this instance).
In this case, while it would have been much easier to move the assets into your trust during your life, your hard work still pays off. Your trustee will have to go to court, show the judge the Assignment to Trust and/or Schedule of Assets, and ask for a court order to move the assets into the trust. In most cases, the judge will rubber-stamp the order and move on because that’s much easier than a full probate. Your trustee will have to pay the court fees and experience some delays in getting things done, but at least they avoided the full probate process.
That is not true if you did not leave any evidence behind of what you considered to be a trust asset. If there is no evidence to prove that an asset was supposed to be in the trust, then a full probate is required. The executor of your will (who is usually also the trustee of the trust, because that makes life easier) will oversee the probate process, and at the end of the probate, the assets can all be moved into the trust, and the trust administration can proceed.
Okay, so I should fund my trust. How do I do that?
For real property (i.e., your house and any other land you own), you’ll need to execute a Grant Deed, giving ownership to yourself as trustee of the trust. For most everything else, you’ll need to contact the institution holding the assets, inform them that you want to move your assets into your trust, and they will send you paperwork. Yes, it will be tedious, but if you persevere, then it will be done, and you will have saved your future trustee a lot of hassle down the road. If you used a lawyer for this process, then they can likely help you with the funding process as well. (Just don’t ask them to deal with banks directly; bankers don’t like talking to lawyers anymore than anyone else does.)
If you have questions about funding your trust or would like help with the trust funding process, don’t hesitate to get in touch with me at kaway@kawaylaw.com, and I will be happy to help.
