For a trust to function properly it is not enough for the Grantor to just sign the document known as the trust agreement. The grantor MUST place assets into the trust for the trust to be valid – this is known as “funding the trust.”
Funding refers to moving assets that are titled to another person or entity and transferring them into the name of the trust. It can be as simple as creating a bank account with $50.00 in it or as complex as transferring a group of LLC entities and their collective assets into the name of the trust.
The end goal of the funding process is to ensure the Grantor’s property will be governed by the terms in the trust agreement.
Why Should You Fund Your Trust?
- Assets outside your Revocable Living Trust or other Trusts can’t be managed by your Trustee. If assets are outside the Trust they may require a guardianship to be properly managed. This creates significant costs and reduced privacy for those assets and the beneficiaries of the assets.
- Assets held outside a Trust will likely require the probate process. One of the common reasons for using a trust is to avoid probate and to keep the agreement private.
- Assets held outside the Trust may not go to your intended beneficiaries. Instead, assets held outside of the trust may pass by rights of survivorship to other joint owners or to the beneficiary named on the beneficiary designation form such as is used for a payable on death account or transfer on death account.
- An Unfunded Trust is Just a Stack of Papers no matter if it is revocable, irrevocable or some other type of trust.
It is important move your intended assets to the name of your trust. Work with an attorney at Legal-Eagles to create your trust and ask them to assist you in funding your trust properly. Call for a complimentary consultation, 321-631-0506, at one of our two offices: Melbourne and Cocoa Village.
