"Funding" is the process of transferring property to a trustee, to be held, administered, and distributed under terms of the trust. A trust can only be created if it is funded with trust property. After the trust instrument has been executed and the trustee has been appointed, the Grantor transfers property to the trustee. The trustee holds title to the property and administers it according to the terms of the trust instrument. On the death of the Grantor, the trustee will hold the property or distribute it to the persons entitled to distribution under the trust instrument.
It cannot be overemphasized that the benefits of a revocable Living trust will be realized only if, and to the extent that, the trust is funded. If the Grantor wishes to avoid probate administration of property after his or her death,6 for example, the trust will achieve that goal only if the property has actually been transferred to the trustee during the Grantor's lifetime. If the Grantor wishes the trustee (or successor trustee) to manage property in the event of the Grantor's incapacity,7 the trustee (or successor trustee) can do so only if the property has actually been transferred to the trustee before the Grantor becomes disabled. Of course, some property may be transferred to heirs and devisees after the owner's death without probate administration even when there is no trust. Community property that passes to the surviving spouse will be subject to probate administration only at the election of the surviving spouse,8 and certain small estates may be transferred to other beneficiaries or heirs under ''summary administration'' statutes.9 However, a revocable Living trust will remove property from probate administration only if the property is transferred to the trustee during the Grantor's lifetime.
To Fund a Trust:
- One must make ownership changes to change the title of an asset from her/his name as an individual to the name of the trustee of the trust.
- For other assets, such as life insurance and retirement accounts, one must make beneficiary changes to properly distribute those assets upon your death. The beneficiary will not always be the living trust.
Generally, to transfer assets to a trust, one must execute new documents of title, deeds to real property, signature cards for your bank accounts, or change of beneficiary forms. The process of transferring property to the trustee is sometimes referred to as ''titling.'' This recognizes that it is essential for the trustee to hold the ''title'' to an asset if the asset is to form a part of the trust. The trustee holds title to trust property in the trustee's name as trustee under a trust instrument.