The Importance of Funding a Trust

Trusts can be an excellent estate planning tool because they offer several important benefits, including privacy, continuity of management, and, in many cases, avoiding probate. However, a trust can only accomplish those goals if it is properly funded.

What does it mean to fund a trust?

Funding a trust means transferring ownership of your assets into the trust. In other words, after the trust is created, your property must actually be retitled, assigned, or otherwise transferred into the trust for the trust to control that property.

Although this sounds simple, many trusts are never fully funded. As a result, some assets remain outside the trust and are not governed by its terms.

Why does it matter if a trust is unfunded or underfunded?

If a trust is unfunded or underfunded, it means that some or all the assets intended to be held by the trust were never actually transferred into it. In practical terms, that can undermine the purpose of the trust and may leave loved ones with more work, delay, and expense after someone dies.

An unfunded or underfunded trust can also cause assets to pass through probate if they are still titled in the decedent’s individual name. Probate can be time-consuming, public, and more expensive than using a properly funded trust. It can also create confusion if the trust was expected to control the destination of those assets.

 Why proper funding matters

A trust is only as effective as the assets actually placed into it. A well-drafted trust is an important part of an estate plan, but it must be properly funded to work as intended. If you are interested in creating an estate plan or ensuring your trusts are properly funded, contact Jabbour Law today.