When attorneys use the phrase “funding your trust”, what they are referring to is the process of retitling assets and changing beneficiary designations to ensure that your trust is able to control all of your property. An “unfunded” trust is like a car with no gas – it may look nice, but it simply is not going to work! If the trust does not hold title to your assets, then it cannot control them, and therefore your assets will not be managed or distributed according to the terms of your trust. If you pass away with and unfunded trust, your estate will go through the probate process, and while your assets may ultimately get funded to your trust at this time through your Pour Over Will (see below), the cost to administer your estate will be much higher, you will lose all privacy associated with a trust, and you will have missed out on all of the lifetime benefits of having a Living Trust.
Beyond simply having assets funded to your trust, it is important to remember that how an asset is titled can have a substantial impact on its distribution upon your death. For example, if you hold asset titled as joint tenants with another person, regardless of what your will or trust says, when the first of the owners passes away, their interest in the property will pass to the other joint tenant. Conversely, if you hold title to assets as tenants in common, you are free to pass your interest in the property to whomever you choose through your estate planning. Also, if an asset has a beneficiary designation or transfer on death designation attached to it, that asset will pass by contract directly to the named beneficiary upon your death, and will not be affected by the provisions of your will or trust. This is why it is imperative to ensure that your assets are properly funded in coordination with your overall estate plan.
Be sure to ask your attorney whether they will assist you in funding your trust, and if they do, whether they will charge you separately for the funding process. Remember, if your trust is unfunded, you have essentially just paid more money to end up with a Will the centerpiece of your estate plan.