Funding Your Family Trust

What it Means to “Fund” a Revocable Trust

After an individual (the “grantor” also known as the “settlor” or “trustor”) creates a revocable family trust, the next step is to implement the trust by “funding” it. “Funding” the revocable trust simply means transferring ownership of assets owned by the grantor as an individual to the trustee of the revocable trust.

Why a Revocable Trust Should Be Funded

In most instances, a grantor should transfer all assets in his or her own name to the trust to take advantage of the benefits of a revocable trust. Important benefits of a revocable trust include:

  • Ease of management of assets during disability.
  • Probate of Avoidance.
  • Flexibility in disposing of non-probate assets.

Many clients believe that if they simply set up a revocable trust, all of the above benefits will follow automatically. Clients often forget, however, that only what is held in the name of the revocable trust avoids probate and ancillary probate at death and formal conservatorship in the event of disability. In addition, naming a revocable trust as the beneficiary of certain non-probate assets (such as life insurance proceeds, annuities, and death benefits) will ensure that these assets pass at death in accordance with the terms of a revocable trust.

Typically, the full benefit of a revocable trust will be realized only if most of the assets have been transferred into a revocable trust during the grantor’s lifetime.

Leave a Reply

Your email address will not be published. Required fields are marked *