Trust Funding: You Signed the Trust, But Did You Move the Assets?

Signing your estate planning documents is a great feeling. You walk out of the attorney’s office with a binder under your arm, feeling a sense of relief that your affairs are in order.

But for many people, the job isn’t actually finished when they put down the pen.

In fact, one of the most common reasons estates end up in court, even when a Trust exists, is a failure to complete “Step Two.” This step is called Trust Funding, and without it, your beautiful new legal documents might be little more than expensive paperweights.

If you have recently looked for trust creation services in Sarasota, or if you have an existing trust you haven’t looked at in years, here is why checking your funding is critical.

The “Bucket” Analogy

To understand the mechanics of a Revocable Living Trust, imagine a container, like a bucket.

• The Trust Document: This is the bucket itself. The instructions written on the side of the bucket tell the world who holds the handle (the Trustee) and who gets the contents when you pass away (the Beneficiaries).
• Funding: The act of actually putting your “stuff” into the bucket.

If you sign the trust document but never change the titles on your bank accounts, real estate deeds, or investment portfolios, you have created a valid bucket, but it is empty. In legal terms, this is often called a “Dry Trust.”

The “Dry Trust” Trap

Why is this a problem? Because the Florida probate court only cares about who owns the asset at the moment of death.

If you pass away with a bank account in your individual name (e.g., “John Smith”), the bank generally freezes that account. They cannot give it to your Trustee because the Trust doesn’t own it; John Smith owned it. To move that money into the Trust, your family typically has to open a probate administration.

Essentially, an unfunded trust fails its primary purpose: avoiding court intervention.

Checklist: Assets to Put in Trust

While every plan is unique, here are common assets that clients often need to retitle to “fund” their trust properly:

1. Real Estate: Your home and any vacation properties usually require a new Deed transferring them from “You” to “You, as Trustee.”
2. Bank Accounts: Checking, savings, and CDs often require retitling.
3. Brokerage Accounts: Non-retirement investment accounts should generally be held by the Trust.
4. Business Interests: LLC membership units or corporate stock assignments.
5. Tangible Personal Property: I typically prepare a specific assignment document to transfer your jewelry, art, and furniture into the Trust.

Note: Some assets, like IRAs and 401(k)s, are generally NOT transferred into a Trust during your lifetime due to tax consequences. Always consult with a professional before moving retirement funds.

Did You Finish Your Homework?

When I work with clients, I provide specific instructions on how to fund their trust. However, life gets busy. People leave the office intending to go to the bank “next week,” and three years later, the accounts are still in their individual names.

If you aren’t sure if your Trust is fully funded, now is the time to check. A simple review can save your family months of stress and legal fees later.

• Read more about Trust Administration in Florida.
• Check my FAQ for more answers on Trusts and Probate.

Is your Trust empty?

Don’t wait for a crisis to find out. Contact my office to schedule a review of your current estate plan.

Legal Disclaimer

The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience.

This blog post is for general informational purposes only and does not constitute legal advice. Reading this article or contacting our office does not create an attorney-client relationship. Every legal situation is unique; you should consult with a qualified attorney regarding your individual circumstances. Nothing in this article should be considered tax advice. Our office does not provide tax advice, and you should consult with a qualified tax professional before taking any action that may have tax consequences.