Don’t wait to fund your trust
Revocable living trusts are a popular way for residents of Florida to pass their assets on to their loved ones. However, the story doesn’t end when the trust is written and the person creating the trust, the trustor, signs on the dotted line. In order for a trust to operate as it should, the trustor needs to “fund” — that is, transfer assets to — the trust.
When a trustor funds a trust, property in which the trustor has title to is retitled in the name of the trust itself. If an asset has a beneficiary, then the trust will be designated as the beneficiary of that asset. By transferring assets to a trust, funding the trust, those assets will be controlled per the language of the trust itself. The assets can then be handled by the person selected to manage the trust, the trustee. Once the trustor passes on, the trustee can then pass the assets in the trust on to the beneficiaries of the trust.
Funding a trust is important for a number of reasons. First of all, if an asset is not titled in the name of the trust, the trustee has no control over it. If the trustor subsequently becomes incapacitated, his or her family members will need to go to court in order to institute legal guardianship over the assets that were not placed in the trust. Moreover, if an asset is not placed in the trust at the time of the trustor’s death, that asset may be subject to the probate process, negating one of the primary reasons a person may establish a trust in the first place. Finally, if an asset is not placed in the trust at the time of the trustor’s death, it will be controlled by other laws regarding the passing down of property. This may result in property being passed on in a way that the trustor did not intend.
In the end, unless it is funded, a trust cannot serve its purpose. For this reason, a person creating a trust should not hesitate to transfer title to the assets to the trust or name the trust as the beneficiary of an asset if appropriate. An estate planning attorney can help with the creation of a trust and the subsequent trust administration.
Source: the balance, “What Does ‘Funding a Trust’ Mean?,” Julie Garber, March 6, 2017