Legal Definitions - funding a trust

“Funding a trust” refers to the crucial process of transferring ownership of assets from an individual's personal name into a trust that has already been legally established. While creating a trust document outlines how assets *should* be managed and distributed, the trust has no power over those assets until they are formally transferred into it. This act of transferring ownership is what makes the trust an active and effective legal tool for managing wealth and planning an estate.

Without proper funding, assets remain in the individual's personal estate and may be subject to probate or other legal processes, even if a trust exists. Funding involves changing the legal title or ownership of assets—such as real estate, bank accounts, investment portfolios, or valuable personal property—so that the trust, rather than the individual, becomes the legal owner.

Here are a few examples to illustrate how funding a trust works:

• Example 1: Funding Real Estate

  Imagine Maria has created a revocable living trust and wants her primary residence to be part of it to avoid probate. To fund the trust with her home, Maria must execute a new deed. This new deed will transfer the property's title from "Maria Rodriguez" to "Maria Rodriguez, Trustee of The Maria Rodriguez Living Trust dated [Specific Date]." Once the new deed is recorded with the county, the house is legally owned by the trust, not Maria as an individual. This ensures that upon her passing, the property will be managed and distributed according to the trust's instructions, bypassing the probate court.

• Example 2: Funding Financial Accounts

  David has established a trust to manage his investments and savings for his children. To fund the trust with his brokerage account and bank accounts, David visits his financial institutions. He works with them to change the ownership of these accounts from "David Chen" to "The David Chen Family Trust." This re-titling process legally transfers the funds and investments into the trust's ownership. Now, the trust's trustee (which could be David himself initially) has the legal authority to manage these accounts according to the trust document's terms, ensuring a smooth transition of financial assets.

• Example 3: Funding Valuable Personal Property

  Eleanor owns a valuable collection of antique furniture and artwork that she wishes to pass down to specific beneficiaries through her trust. Since these items don't have formal deeds or titles like real estate or bank accounts, Eleanor funds her trust by preparing a document called an Assignment of Personal Property. This document formally lists each item in her collection and declares that their ownership is transferred from "Eleanor Vance" to "The Eleanor Vance Irrevocable Trust." By signing and dating this assignment, Eleanor legally places her antique collection under the trust's ownership, ensuring they will be distributed as outlined in her trust agreement.