By Eric D. Morton
Most families and individuals with estate plans have a living trust. A living trust can avoid probate, maintain privacy, and provide a smooth transition of assets after death. However, one of the most common and costly mistakes in estate planning occurs after the trust documents are signed: failing to move assets into the trust.
A trust can only control assets to which it holds title. Listing assets in an exhibit to the trust does not give title to those assets to the trust. Assets in individual’s name on death may still have go through probate.
What Does “Funding” a Trust Mean?
Funding a trust means transferring ownership of assets from the individual trustors into the name of the trust. For example, instead of holding title as “John and Jane Smith,” ownership should reflect something similar to:
John and Jane Smith, Trustees of the Smith Family Trust dated January 1, 2025.
Without this transfer, the trust has no authority over those assets.
Which Assets Should Be Transferred Into the Trust?
The family residence is often the most important asset to transfer into the trust, but it should not be the only one. Other significant assets that should commonly be reviewed for trust ownership include:
- Additional real estate or rental properties
- Stock and brokerage investment accounts
- Non-retirement investment assets
- Business interests, including LLC or partnership interests
- Valuable personal property
- Certain promissory notes or private loans
Each asset category may require different transfer documents, beneficiary designations, or assignment agreements.
The Consequences of Failing to Fund the Trust
When assets remain titled in an individual’s name at death, surviving family members may be forced to open a probate proceeding to transfer ownership—even when a trust exists.
Probate can involve:
- Court filings and legal fees
- Delays in distributing assets
- Public disclosure of estate information
- Additional administrative burdens for family members during an already difficult time
In many cases, families are surprised to learn that a trust alone does not avoid probate unless the assets are properly connected to the trust.
Estate Planning Requires Ongoing Maintenance
Estate planning should not be viewed as a one-time event. As clients acquire new property, open new investment accounts, or form business entities, they should periodically review whether those assets are titled correctly.
Likewise, refinancing real estate, changing financial institutions, or restructuring a business can unintentionally remove assets from the trust if ownership is not carefully reviewed afterward.
A Periodic Review Can Prevent Future Problems
An estate plan works best when the legal documents and asset ownership are aligned. Periodic reviews with estate planning counsel can help ensure that:
- Assets are properly titled
- Beneficiary designations remain current
- Newly acquired assets are addressed
- The estate plan continues to meet the client’s goals
A properly funded living trust can save loved ones substantial time, expense, and stress. The key is making sure that the trust actually owns the assets it is intended to protect.
Eric D. Morton is the principal attorney at Clear Sky Law Group, P.C. He can be reached at 760-722-6582, 510-556-0367, and emorton@clearskylaw.com