Funding is the process of transferring ownership of assets into a trust — by retitling, deed, assignment, or beneficiary designation. An unfunded trust controls nothing; the most elegant document fails if the assets never make it in. Funding is where estate plans most often break down, and it is a recurring source of malpractice exposure.
| Asset | Funding method |
|---|---|
| Real property | New deed conveying title to the trustee (record it) |
| Bank / brokerage accounts | Retitle in the name of the trust (or POD/TOD as a backup) |
| Closely held business interests | Assignment of membership/partnership interests; update the operating agreement and consents |
| Tangible personal property | General assignment of personal property to the trust |
| Life insurance | Change owner/beneficiary as the plan requires (or use an ILIT) |
| Retirement accounts | Beneficiary designation only — never retitle into the trust |
| Vehicles | Often left out (title at death or small-estate transfer); jurisdiction-dependent |
- Confirm the trust's exact legal name and date; inconsistent naming across deeds and accounts causes title defects.
- Check for due-on-sale clauses on mortgaged property — the Garn-St Germain Act protects transfers to a revocable trust of a personal residence.
- Notify homeowner's and title insurers of the change to preserve coverage.
- Address S-corporation stock carefully — only certain trusts (grantor, QSST, ESBT) are eligible shareholders.
- Update the beneficiary designation on retirement accounts to the trust or individuals per the SECURE analysis, not by retitling.
The recurring failure
Clients sign the binder and never move the assets, or acquire new assets outside the trust over time. Build a funding follow-through step, deliver a written funding letter, and re-audit at each plan review.
Key takeaways
- An unfunded trust is inert — funding is the step that makes the plan real.
- Match the method to the asset: deeds for realty, retitling/assignments for accounts and business interests, designations for insurance and retirement accounts.
- Never retitle retirement accounts into a trust; use beneficiary designations.
- Failure to fund (and to fund newly acquired assets) is a leading malpractice risk — build in follow-through and re-audits.
Authorities
- Garn-St Germain Depository Institutions Act, 12 U.S.C. 1701j-3(d)
- IRC 1361(c)(2), (d), (e) (eligible S-corporation trust shareholders)