“I Have a Trust, But What Does It Mean To Have It “Funded?”

By Adil Daudi, Esq.

Although the concept of estate planning has been addressed in my previous articles, as well as the importance of establishing a Revocable Living Trust, one topic that I have yet to bring up is the importance of “funding” a trust.

In many cases, the funding of your trust is actually the most important step in completing an estate plan. However many attorneys fail to inform their clients of this step. So what does “funding your trust” mean? The literal meaning of it is the process of transferring, or changing, title of your assets, whether they are bank accounts, real property, investments, from your individual name into the name of your trust.

A simple method of viewing this is to consider your trust as a box, where it is your primary objective to place as many as assets as possible into that box; therefore, removing it from your personal name. Only by accomplishing this process will the true purpose of your trust be fulfilled. It is important to note that one of the major benefits of establishing your trust is to avoid the probate process, and the only way your estate will go through probate is if you pass away with assets titled in your individual name.

Often times after explaining the concept of “funding” the question is raised on how to go about completing the process. First off, if you are in the process of obtaining your trust from an attorney, be sure to ask whether the cost of the trust includes the funding process. More often than not the answer will be no, however if that is the case than it should be strongly considered whether it is worth pursuing with that firm. Typically, all trusts I create for clients include the step of funding, as well as unlimited changes to it. Be sure to consult with your attorney on similar perks.

Nevertheless, funding real estate into your trust requires the recording of a new deed and transferring the property from your individual name into your trust. After completion of the deed, it would then need to be filed with the county. In addition, to fund your bank accounts/investments, it may require a little more than filling out one piece of document, as you would need to contact each of your financial institutions and have them change the names on the account and/or change the beneficiary to your trust.

As mentioned above, assets held in your individual name, and which are not in joint ownership or listed to a beneficiary, at the time of your passing must go through probate; which is the court process of distributing your wealth. It is also a public proceeding in which your assets are exposed to the general public. Moreover, it is a time consuming and expensive process that no individual should have to partake in, especially if they created a trust.

If you have already taken the steps to creating a sound estate plan, then half the work is complete. But in order to satisfy the full requirements of your trust, it is equally important, if not more, to take a second and ensure the funding of your trust has been completed. If you are unsure about this step, please contact me at my office and I would gladly review your estate plan. If you have already spent the money in creating a trust, why not take the step and make sure it is enforceable.

Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Business Litigation, Corporate Formations, and Family Law. He can be contacted for any questions related to this article or other areas of law at adil@josephlaw.net or (517) 381-2663.

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