Creating a revocable living trust is an important step. But it is only half of the work. A trust that is not properly funded is essentially an empty container. It does not protect your assets from probate, it does not provide for your loved ones the way you intended, and it does not do what you paid to have done.
Trust funding is the process of actually transferring your assets into your trust, and it is one of the most commonly overlooked steps in estate planning.
At the Law Office of Catherine Chukwueke, I help California clients complete the funding process so their trust works as intended from day one.
What Is Trust Funding?
When you create a revocable living trust, you become the trustee of that trust during your lifetime. But for the trust to control your assets, those assets need to be legally transferred into the trust's name. This process is called funding the trust.
Depending on the type of asset, funding may involve:
- Transferring real property by recording a new deed in the name of the trust
- Retitling bank and investment accounts into the trust's name
- Updating beneficiary designations on life insurance policies and retirement accounts
- Transferring business interests, vehicles, or personal property into the trust
- Updating digital accounts and assets where appropriate
Until these steps are completed, those assets remain outside the trust and may be subject to probate when you pass away, regardless of what your trust document says.
Why Trust Funding Gets Skipped
Trust funding is often left incomplete for a few reasons. Some people do not realize it is a separate step from signing the trust document. Others start the process and get overwhelmed by the paperwork. And sometimes documents are drafted by an attorney who does not offer funding assistance, leaving the client to figure it out on their own.
The result is what estate planners call an unfunded or partially funded trust, which can defeat the entire purpose of having a trust in the first place.
What Happens If Your Trust Is Not Funded?
Assets that are not transferred into your trust at the time of your death will likely need to go through probate, the same court process your trust was designed to avoid. This can be time-consuming, expensive, and public. It can also delay the distribution of assets to your beneficiaries by months or even years.
A pour-over will can capture assets left outside the trust and direct them into it upon your death, but those assets will still pass through probate first. Proper funding during your lifetime is always the better approach.
Ongoing Funding as Your Life Changes
Trust funding is not a one-time event. Every time you acquire a new asset, whether a new home, a new bank account, or a new investment, that asset needs to be titled in the name of your trust if you want it to be covered. I work with clients to make sure new assets are properly incorporated into their plan as their circumstances evolve.
Have Questions?
I work with clients throughout California. If you have an existing trust that may not be fully funded, or if you are creating a new trust and want to make sure the funding is done right, call me at 310-213-7711 or schedule a consultation online.
