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Importance of Funding Your Trust and What Can Happen if You Fail to Do So

Funding a revocable trust is an important aspect of creating the trust and it being valid in the future. If the grantor fails to complete this necessary step, there may be lasting consequences.

Funding a Trust

Funding a trust is the process in which the grantor transfers the assets from his or her own person to that of the trust. Funding a trust often involves changing the titles of assets from a person’s individual name to the name of the trust. This may be completed by signing a title of a car to the trust or a deed to a house to the trust.

Funding a trust is often not difficult. However, it may be time-consuming. How assets are transferred depends on the type of asset, its value, title requirements and the laws in the jurisdiction where the property is situated. Some assets require an owner to sign a deed or title. Others may require an assignment document. The holder of the asset such as a financial institution may require proof of the trust.

Roles Involved in the Trust

The grantor or settlor is the person who establishes the trust. The trustee is the person who is appointed to control the trust. The beneficiary is the person who will receive trust assets or income through the administration of the trust. One of the benefits that grantors have when establishing a revocable living trust is that they can freely buy and sell assets and add and remove assets from the trust. However, if a person dies without an asset being titled to the trust, the trust will not own the asset at the decedent’s death and any provisions related to how it should be treated will be moot.

Avoiding Probate

One of the most common reasons why individuals set up a trust is to avoid the probate process, which can often be expensive and time-consuming. If the settlor did not change the title of the asset or name the trust on a beneficiary designation form for certain accounts, these accounts and assets will not pass outside the probate process. The revocable trust only controls the assets that have been placed into it.

If a person owns assets at the time of his or her death and these assets were not titled in the name of the trust, the probate process may be necessary. There may be shortcuts when the decedent’s estate only consisted of personal property and was below a certain value. However, these shortcuts should not be exclusively relied upon.

If assets are owned in multiple states and they are not titled to the trust, it may be necessary to have ancillary probate in the secondary state. This can result in the settlor’s beneficiaries having to go through two or more separate probate cases. This can cause complications with the probate process and can result in the beneficiaries waiting much longer for the property they were entitled to under the trust. Each state handles probate cases in slightly different manners, which can often cause confusion.


Without a trust in place, a conservatorship may become necessary for any minors that are named as beneficiaries. This may be much more expensive than the administration of the trust would have been. Likewise, if a settlor forgets to fund the trust and later becomes incapacitated, he or she may require a conservatorship to manage his or her funds because the assets are not part of the trust.

Wishes Not Followed

If a person creates a trust and does not fund it and has a will that provides contradictory instructions or no will, the trust provisions that would have applied to the house or other assets will be invalid. This may mean that a person’s wishes that he or she took the time to cement into a trust are disregarded because the assets are not owned by the trust and the trust therefore has no authority over them. The treatment of assets owned outside the trust will be handled pursuant to the provisions in the will or laws of intestacy if there is no will.

Legal Assistance

Individuals who would like assistance in establishing their estate plan may wish to contact an estate planning lawyer. He or she may advise clients about funding the trust to avoid these problems. He or she may also establish a pour-over will to serve as a safety net for any assets owned at the time of the testator’s death.

Read more related articles here:

What Is Funding a Trust?

Don’t Overlook Your Trust Funding

Also, read one of our previous Blogs at:

Why Is Trust Funding Important in Estate Planning?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.


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