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    Sword and Shield Estate Planning

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5 Minutes Read

Funding Your Estate Plan

It’s hard to execute a trust if there are no assets in it.

Your Estate plan is generated, notarized, and secured in a safe location — but there’s still work to do. Properly funding your trust is essential to ensure the successful execution of your Estate plan. This not only applies to your assets at the time you generate your plan, but also for assets you acquire throughout your lifetime.

Although funding is a key element of every type of trust, surprisingly many people overlook or avoid this crucial step. Some procrastinate, assuming they have time to address it later. Others may not be fully aware of the process, or know which assets to incorporate into the trust. For most, the completed plan quickly goes on the back burner, - and it’s not exactly the first thing that comes to mind when opening a new brokerage account or purchasing a vacation home several years later.

The consequences of neglected trust funding

If you neglect to fund your trust by transferring ownership or naming the trust as a beneficiary of your assets, those assets will not be governed by the terms and provisions of the trust. This critical oversight can have significant downstream consequences that affect both the grantor and the beneficiaries, including:

  • Probate Exposure: Assets not held by the trust may be subject to probate. This costly and time-consuming legal process can delay asset distribution and increase administrative expenses.
  • Ineffective Asset Distribution: Without proper funding, assets may not be distributed according to the grantor's wishes, potentially leaving beneficiaries without the intended resources.
  • Impaired Asset Management: Inadequate funding can hinder a trustee's ability to manage assets for the grantor's benefit, especially during periods of incapacity.

Take control: Inventory your assets

Start by creating a comprehensive inventory of all your assets, such as bank and brokerage accounts, real estate holdings, and investments. Consider less obvious asset categories as well, such as:

  • Intellectual Property Rights: If you hold patents, trademarks, copyrights, or other intellectual property rights, it is crucial to include these assets in your trust. Properly funding these assets can protect their value and ensure that they are managed and distributed according to your wishes.
  • Digital Assets: These may include online accounts, cryptocurrencies, digital art, domain names, and valuable online content. Ensuring your trust includes provisions for these assets can prevent potential loss or unauthorized access in the future.
  • Business Interests: If you own shares in privately held companies or have ownership interests in a business, funding these assets in your trust is essential for smooth succession planning and continued business operations.
  • Personal Items of Value: Valuable personal belongings such as art collections, jewelry, antiques, and other heirlooms may hold sentimental and financial value. Including these assets in your trust can ensure they are properly distributed among your beneficiaries.
  • Loans and Indebtedness: Less common but equally important, loans you have made to others or outstanding debts owed to you should be considered in your trust funding strategy. Clarity on how these loans are to be treated upon your passing is crucial to avoid potential complications.
  • Mineral and Water Rights: If you possess mineral or water rights, especially in the context of real estate ownership, ensuring their inclusion in your trust is essential to protect their value and future revenue potential.
  • Life Insurance Policies: While life insurance policies are commonly included in estate plans, they sometimes fall outside the purview of the trust. To maximize their benefits and ensure efficient distribution, consider funding them within your trust.
  • Retirement Accounts: Retirement accounts, such as IRAs and 401(k)s, are often significant components of a person's wealth. While they have designated beneficiaries, funding them directly into your trust can provide an additional layer of protection and coordination with your overall estate plan.

Take Action: The funding process

  • Carefully Review Your Trust Document: Pay close attention to the sections pertaining to asset funding. Each trust type may have specific requirements for asset inclusion, so ensure that you understand the guidelines outlined in your trust document.
  • Categorize and Prioritize Assets: Divide your assets into categories based on their nature and funding requirements. Some assets may require specialized documentation or additional steps for proper transfer.
  • Seek Professional Guidance: Collaborate with experienced professionals who can provide invaluable assistance in navigating the intricacies of trust funding. They will help you understand legal requirements, tax implications, and strategies for funding diverse asset categories effectively.
  • Transfer Financial Assets: Submit the documentation required to put your bank, brokerage, retirement, and other financial accounts into the name of your trust.
  • Transfer Real Property and Tangible Assets: Real estate properties and tangible assets such as art collections, jewelry, and heirlooms should be formally transferred into the trust's ownership. This process typically involves executing appropriate deeds, bills of sale, or other legal documents.
  • Update Beneficiary Designations: For assets like life insurance policies and retirement accounts, ensure that you update beneficiary designations to name your trust as the primary or contingent beneficiary. This step is essential to ensure these assets align with your overall estate plan.
  • Fund Digital Assets: Digital assets, such as cryptocurrencies and online accounts, may require specific procedures for access and transfer. Consult with professionals to create a secure inventory of digital assets and include instructions in your trust for their management and distribution.
  • Fund Business Interests: Transferring ownership of business interests into the trust may require specialized legal agreements. Consult with attorneys and business advisors to ensure a smooth transition and continuity in business operations.
  • Address Loans and Indebtedness: Clearly define how loans and debts owed to you should be treated in your trust. Include instructions for repayment or forgiveness, if applicable.

Be sure to conduct periodic reviews and updates of your trust and its funding to ensure continued alignment with your goals and intentions. Your asset portfolio will certainly evolve over time.

In Sum

A well-crafted estate plan ensures the proper management and distribution of your assets according to your wishes. Embracing the process of trust funding with the same level of diligence will protect your legacy and provide for your loved ones as you intended to. By giving meticulous attention to trust funding, and keeping it up to date at all times, you can avoid probate and ensure a smoother settlement process for your successors.



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This is super helpful, appreciate the work you are doing Curtis.

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