In my 15 years practicing trusts and estates law, clients frequently ask about trust funding: what it is, how to do it, and when to do it. Understanding this is crucial for maximizing living trust advantages.
What Is Trust Funding?
Trust funding involves retitling assets. For example, if you have a $100,000 bank account in your individual name and you've created a trust, "funding" means going to the bank and retitling that account into the name of your trust. Once completed, the trust funding for that account is done.
Should I Fund My Trust?
The short answer: It depends. Always receive specific advice from your attorney. Our office provides detailed guidance letters to clients about which assets we recommend funding into their trust.
Asset-Specific Funding Guidance
Automobiles
Generally NOT recommended for funding into trusts because:
- Auto insurance rates may increase significantly
- Could make you more of a liability target
- Cars are typically the easiest asset to administer after death without probate
Marital Status Considerations
- Single clients or second marriages: More likely to advise funding assets into trust
- Stable, long-term marriages: Often recommend NOT funding joint assets while both spouses are alive
Benefits of Tenants by the Entirety (for married couples):
- Asset protection advantages
- Automatic transfer to surviving spouse (no probate needed)
- Funding into trust eliminates these benefits
Important: Upon first spouse's death, funding assets into the trust becomes very important.
Real Estate
- Homestead property: Depends on various factors. Generally not advisable if married and/or have minor children due to Florida constitutional restrictions
- Non-homestead real estate: Often recommended for trust funding, especially out-of-state property (avoids double probate)
Life Insurance
Generally don't recommend changing ownership (unless creating irrevocable life insurance trust), but often recommend updating beneficiaries to name trusts.
Tax-Qualified Accounts (IRAs, 401(k)s)
Almost never recommend changing ownership to trust, but may recommend updating beneficiaries to name trusts or sub-trusts.
How to Fund Assets
Non-Qualified Accounts
Contact financial institution directly—they'll provide their proprietary forms.
Life Insurance and Tax-Qualified Accounts
Request beneficiary update forms from the institution.
Real Estate
Highly recommend having your attorney handle this. Moving individual property to trust requires a deed; moving LLC/corporation ownership requires an assignment.
Key Takeaway
Always follow your attorney's advice on whether to fund assets into your trust and which specific assets to fund. Your attorney can provide guidance tailored to your specific situation.
Learn more about living trust benefits and proper implementation.
