A revocable living trust can help your family by keeping matters private, reducing delays, and laying out a clear plan. However, the paperwork alone isn’t enough. You need to transfer assets into the trust so it can fulfill its purpose. Many families think the signing day is the finish line. In reality, funding is the final (and crucial) step.
What Does “Funding a Trust” Really Mean?
Funding means changing who owns your assets from you, to your trust. Think of the trust as a container: if you don’t put anything in, nothing can come out to your beneficiaries later. This typically includes retitling real estate, transferring bank and brokerage accounts to the trust, and reviewing beneficiary designations to ensure they align with your plan. Without funding, probate may still be required under Minnesota law.
- Change titles on real estate deeds
- Retitle bank and brokerage accounts
- Align life insurance and retirement account beneficiary designations
Common Funding Mistakes Families Make
These common trust funding mistakes are all fixable, but only if you know to look for them. Use the list below as a quick check, and talk with a revocable living trust lawyer if you’re unsure how your specific accounts should be handled.
1. Forgetting to Update Real Estate Titles
Real estate often drives probate. If your house, cabin, or rental is not titled in the name of your trust, it may still require court involvement. After a refinance, lenders sometimes temporarily remove the trust from the deed. If it’s never added back, the property sits outside your plan. Pull your deeds and confirm that the trust is listed as the owner.
2. Overlooking Bank and Investment Accounts
Accounts don’t “jump” into a trust on their own. If they are in your individual name, your personal representative may need to go through probate.. Review your statements to ensure the title accurately reflects your trust. Beneficiary designations (like “payable on death”) can help in certain situations, but they don’t replace a coordinated funding plan.
3. Mismanaging Retirement Accounts
IRAs and 401(k)s are special. Sometimes naming a trust as a beneficiary can speed up taxes; sometimes it offers needed protections and control. If you have young beneficiaries, loved ones with special needs, or creditor concerns, a trust designation may still be a good option. Your situation is unique. Get personalized guidance from a lawyer before changing retirement beneficiaries.
4. Assuming Life Insurance Is Automatically Covered
Life insurance typically names people directly, but many families prefer proceeds to flow into a trust for better control. An Irrevocable Life Insurance Trust (ILIT) can also keep the policy out of your taxable estate and allow a trustee to release funds over time for education, healthcare, or other goals. Consider whether an ILIT supports your family’s needs and risk level.
Why People Forget to Fund Their Trusts
After signing, most folks feel relieved, and that’s normal. But the “last mile” takes coordination with banks, brokerages, and the county recorder. It’s easy to delay a call or put off a form. Law offices often provide step-by-step instructions.
Guidance from a Revocable Living Trust Lawyer
Stone Arch Law Office shares helpful education on getting started. In one of our videos, Philip Ruce explains that you don’t need to bring stacks of documents to your first trust meeting. Focus on key assets, decision-makers, and a general picture of your net worth. The idea is to start the process; your attorney can guide the details and follow-ups.
“Don’t stress too much about preparation. The barrier to entry for this meeting is low your attorney’s job is to guide you the rest of the way.”
Key Takeaways
Funding is what turns a stack of signed documents into a plan that actually works. A little follow-through now can spare your family from delays and confusion later.
- A trust only works if assets are properly titled or assigned to it.
- Real estate, bank accounts, and investments are common “misses.”
- Retirement accounts require special analysis before naming a trust.
- Life insurance can be directed to a trust or owned by an ILIT, for added control.
- Conduct a yearly funding review or meet with a revocable living trust lawyer to assess.
Fund Your Trust Today
Taking care of your trust funding now gives your family clarity and peace of mind later. If you’re unsure whether your assets are correctly titled or you’d simply like to review your plan, the team at Stone Arch Law Office can help you make sure your trust actually works the way you intend. Book a Call today to start the conversation.
References: J.P. Morgan (Nov. 27, 2024). When Does It Make Sense for a Trust to Own Your Life Insurance Policy? And Stone Arch Law Office video: What documents do I need to gather in order to do a revocable trust with an attorney? (Philip Ruce)
