It is important to fund your trust. A trust spells out who will be in charge of things if you were to pass away or become incapacitated. While beneficiaries are listed in the trust during planning, that doesn’t mean you’re done with setting up your trust for success. Let’s say you look at your brokerage account and see that your name and your son’s name are listed as joint owners. The financial institution lets you know that if you pass away that brokerage account goes to your son. Now you’re confused because you just completed a Revocable Living Trust that says all your assets are to be split evenly between your two sons. You tell the financial institution that you want everything split equally between your two sons, and as a result, the financial institution suggests that you should first remove your son’s name.
Now the account is solely titled.
You then learn that if that account does not have a beneficiary, which means that the account will go through the court probate process. Now you’re further confused because you thought you did a Revocable Living Trust to avoid that court probate process. This scenario highlights the importance of properly funding your trust. If your trust is not funded, then people may inherit your assets in ways you have never intended.
The Importance of Funding your Trust
When it comes to a trust and funding, the most important thing is how the assets are titled. If you have an asset that is joint with rights of survivorship, then upon death that asset goes to the other joint owner. If you own an asset in just your name, with no beneficiary, that goes through the court probate process. If you own an asset with a beneficiary, that passes to the beneficiary. If you own an asset in your trust, then the terms of the trust will apply.
How to Fund a Trust?
So how do you fund a trust properly? Funding a trust is specific to the type of asset that needs funding. For example, real estate is funded very differently than IRA’s. You must be careful to fund things properly, or there could be adverse tax consequences:
- Real estate may be funded into the Revocable Living Trust by preparing a new deed.
- IRAs should not be titled into your Revocable Living Trust during lifetime, but may be able to pass by beneficiary designation into a properly drafted trust upon death.
- Life Insurance may go into a special kind of irrevocable trust that gets completed to remove the death benefit from your gross estate to help save on estate tax.
- Savings accounts may be titled into the trust.
- Checking accounts may pass by beneficiary designation into the trust.
There are many different asset types – having the assistance and guidance on what to do with each type of asset is critical to a properly funded trust. The team at Sinclair Prosser Gasior is here to assist clients with drafting of the trust and funding the trust to ensure our client’s estate plans works as they expect it to work.
- Why Do Heirs Prefer Trusts? - August 26, 2025
- What Happens If You Don’t Have a Power of Attorney? - July 22, 2025
- Stretching Your IRA with a Charitable Trust: A Strategy to be Used Post-SECURE Act - June 25, 2025
