[ Estate Planning · Essay ]
Trust funding,
the step most plans skip.
An unfunded trust is worse than no trust. It is a closed envelope, sitting in a drawer, that a family discovers does not own anything at exactly the wrong moment.
[ 01 ]
Why funding is the entire point.
A revocable living trust does its work by holding title to assets. The successor trustee can act on assets the trust owns. The probate court must be involved for assets the trust does not own.
An unfunded trust holds nothing. The drafted document, however carefully written, is just paper until the deeds and the account titles catch up to it. Funding is the part that makes the document do what it was drafted to do.
[ 02 ]
Assets to retitle into the trust.
Real estate.
We prepare a Tennessee deed transferring the property from your individual name to the trust as trustee. We record the deed with the county register's office. The home now passes outside probate.
Bank and brokerage accounts.
Retitling letter to the institution, new signature card, new account in the trust's name with the same tax identification number. The institution does the work, with our cover letter.
Business interests.
Membership units in an LLC, S-corp shares, partnership interests. Assignment from the individual to the trust, with operating agreement consents where required.
Personal property.
Tangible items of significant value, art, collections, jewelry, are usually transferred by general assignment. Vehicles depend on the state and the family's preference.
[ 03 ]
Assets that should not go in the trust.
Retirement accounts.
IRAs, 401(k)s, and 403(b)s pass by beneficiary designation. Retitling them into a revocable trust accelerates income tax in ways that almost always cost the family. Use the beneficiary form on file with the custodian, possibly naming the trust as a contingent beneficiary, with care.
Health Savings Accounts.
HSAs have specific beneficiary treatment. Naming a spouse as beneficiary preserves the account's HSA character. Naming the trust does not.
Life insurance.
Use beneficiary designations. Trust ownership of life insurance has specific use cases, but for most families, beneficiary designations on the policy are correct.
Vehicles.
Often retitled, often not. Tennessee permits joint titling and transfer-on-death-style designations that avoid probate without trust ownership. Discuss preference with us.
If you have a trust that has not been funded, the right next step is the funding review.
See revocable living trust →[ 04 ]
The coordination problem.
Funding the trust is one half of the work. The other half is making sure the assets that stay outside the trust pass cleanly to the right people. That is the beneficiary designation review.
We pull the current beneficiary forms on every retirement account, life insurance policy, and HSA in the household. We update them where the plan calls for it. We document what we did.
[ 05 ]
What goes wrong.
- Trust drafted, never funded. The most common failure mode.
- Real estate refinanced after funding, with the lender's title work not naming the trust correctly.
- New accounts opened in individual name, never moved into the trust.
- Beneficiary designations not updated, contradicting the trust's terms.
- Out-of-state real estate funded into a Tennessee trust without coordinating with counsel in the other state.
[ The Short Version ]
What to remember.
- A trust controls only what is titled in the trust's name.
- Real estate, bank accounts, and brokerage accounts are usually retitled.
- Retirement accounts and life insurance usually pass by beneficiary designation, not into the trust.
- Funding is an ongoing discipline. Newly opened accounts need to join the trust as they appear.
[ Further Reading ]