FUNDING YOUR TRUST

Funding your trust is one of most important steps in having a trust and is the one step most often not completed. To repeat, a trust is a legal entity in which a person known as a “Trustee” holds legal title to property for the benefit of a person known as a “beneficiary.”

In order for the designated Trustee to hold title to property for someone, that property must be titled in the name of the Trust. If you want your house distributed according to the terms of your trust, the title to your house must be in the name of your Trust. If you want your bank accounts managed through your trust, the title to your bank account must be in the name of the Trustee of your trust.

Title to property in a trust is usually in the following format: “Name, Trustee of the Name Trust.” So if your name is Mary Smith, to have your property in your trust, the title must be in the name of “Mary Smith, Trustee of the Mary Smith Trust.” Your lawyer should prepare a deed from you to yourself as “Trustee of your trust.” The bank accounts you wish to be managed by your trust should be changed to “your name, Trustee of your trust.” If you wish the benefits of your life insurance policies to go into your trust, you must name the trust as the beneficiary of the policies. This is called “funding your trust.”

If you do not do this the trust will not be funded.  The trust will not have control of the intended property. The account titles and beneficiary designations will override your objectives.  A properly created estate plan with a trust also has a Last Will and Testament (“Will”). With many trust, especially a Revocable or Living Trust your Will is what is called a “Pour Over Will”.  A Pour Over Will provides that your Residuary Estate is to be distributed to the Trustee of your Trust.

After death, your Trust is “funded” through the probate of your will. But your estate will have to go through the public process of probating your will, with its attendant costs and delay.  Only then is your Trustee able to manage, control and distribute your trust assets as you have directed. 

If you fund your trust and make these changes to the title of your assets during your life, your trust will govern your assets as you desire.  This is a very important step in being sure you are protected by your trust and your wishes are cared out 

Be sure to use an attorney that will assist you in this step. Unfortunately a lot of “form” trust companies do not bother with this step, or at best send you a form letter instructing you about what must be done but leaving it to you to do it.  Make sure it gets done. 

 Failure to fund a trust before incapacity or death may at best result in the necessity of probate and its attendant expense in delay, and at worse, defeat of your intentions as expressed in your trust.  Without funding, your trust can be ineffective.