The Biggest Trust Mistake
Here's a startling fact: an estimated 50-70% of living trusts are not properly funded. This means thousands of families have trusts that won't work as intended because their assets were never transferred into them.
An unfunded trust is like a safe with nothing in it — it exists, but it doesn't protect anything.
What Is Trust Funding?
Trust funding is the process of transferring ownership of your assets from your individual name into the name of your trust. Until an asset is titled in the trust's name, it's not protected by the trust.
Assets That Should Be Funded Into Your Trust
Real Estate
- Primary residence
- Investment properties
- Vacation homes
- Raw land
How: Record a new deed transferring ownership from "John Smith" to "John Smith, Trustee of the John Smith Living Trust."
Financial Accounts
- Bank accounts (checking, savings, CDs)
- Brokerage accounts
- Money market accounts
How: Contact your bank or broker and complete their trust transfer paperwork.
Business Interests
- LLC membership interests
- Partnership interests
- S-Corp stock (consult tax advisor)
How: Amend the operating agreement or corporate documents to reflect trust ownership.
Other Assets
- Vehicles (in some states)
- Valuable personal property
- Intellectual property
- Notes and receivables
Assets That Should NOT Be in Your Trust
- Retirement accounts (IRAs, 401(k)s) — These have their own beneficiary designations
- Health Savings Accounts — Same as retirement accounts
- Life insurance — Name the trust as beneficiary instead
- Vehicles (in most states) — Transfer-on-death is simpler
The Funding Timeline
After your trust is created, funding should begin immediately:
1. Week 1: Transfer real estate (deed recording)
2. Week 2-3: Transfer bank and investment accounts
3. Week 3-4: Update business ownership documents
4. Ongoing: Fund any newly acquired assets into the trust
What Happens to Unfunded Assets?
Assets not in the trust at the time of death go through probate — exactly what the trust was designed to avoid. The pour-over will catches these assets and directs them into the trust, but only after the probate process.
How Our Packages Help
Our Individual and Couples Trust packages include detailed Trust Funding Instructions — a step-by-step guide customized for your state that walks clients through transferring each type of asset. We also include property assignment documents for easy transfer.
Talking to Clients
When referring clients to estate planning services, emphasize the importance of funding:
"Creating a trust is the first step, but funding it is what makes it work. Our packages include complete funding instructions so your trust actually protects your assets."
This differentiates our service from competitors who create the trust document but leave clients on their own for funding.