A revocable living trust is one of the most powerful estate planning tools available — but only if it is properly funded. An unfunded trust provides none of the benefits of a trust and may leave your family in a worse position than if you had no trust at all. Here's what trust funding means and why it matters.
What Does 'Funding a Trust' Mean?
When an estate planning attorney creates a revocable living trust, they create a legal entity — but that entity has no assets until you transfer your property into it. 'Funding' a trust means re-titling your assets from your individual name into the name of the trust.
For example, if your name is John Smith and your trust is called 'The John Smith Revocable Living Trust dated January 1, 2024,' your home would need to be re-titled from 'John Smith' to 'John Smith, Trustee of The John Smith Revocable Living Trust dated January 1, 2024.' Until that re-titling occurs, your home is not in your trust — and it will go through probate at your death.
Which Assets Need to Be Funded Into the Trust?
The following assets typically need to be re-titled into your trust:
Real Estate: Your primary residence, vacation home, rental properties, and any other real estate you own in Michigan should be deeded into your trust. This requires a new deed, which must be recorded with the county register of deeds.
Bank Accounts: Checking accounts, savings accounts, money market accounts, and CDs should be re-titled in the trust's name. Contact your bank to update the account title.
Investment Accounts (Non-Retirement): Taxable brokerage accounts, mutual fund accounts, and other non-retirement investment accounts should be re-titled in the trust's name.
Business Interests: If you own an interest in an LLC, partnership, or S-corporation, your ownership interest should be transferred to your trust (subject to any restrictions in your operating agreement or buy-sell agreement).
Personal Property of Significant Value: Valuable jewelry, artwork, collectibles, and other personal property can be transferred to the trust through a general assignment of personal property.
What Should NOT Be Funded Into the Trust
Certain assets should not be titled in your trust — but should instead name your trust as beneficiary:
Retirement Accounts (IRAs, 401(k)s, 403(b)s): Transferring a retirement account into a trust would be treated as a distribution — triggering immediate income taxes on the entire balance. Instead, you should name your trust as the primary or contingent beneficiary of your retirement accounts. However, this requires careful drafting to ensure the trust qualifies as a 'see-through trust' under IRS rules.
Life Insurance: Life insurance proceeds pass directly to the named beneficiary and avoid probate regardless of how the policy is titled. Naming your trust as beneficiary allows the proceeds to be distributed according to your trust's terms — which is often preferable to naming individual beneficiaries directly.
Annuities: Like retirement accounts, transferring an annuity into a trust may trigger taxes. Consult your tax advisor before making any changes to annuity ownership.
The Ongoing Nature of Trust Funding
Trust funding is not a one-time event — it is an ongoing process. Every time you acquire a new asset, you need to ensure it is properly titled in the name of your trust. This includes:
- Real estate purchased after the trust is created - New bank or investment accounts - Inherited assets - Business interests acquired after the trust is created
Many families create a trust, fund it initially, and then fail to title new assets correctly over the years — leaving their estate partially in the trust and partially outside it. This 'partial funding' can create significant complications at death and may require a partial probate proceeding.
The Michigan Society for Financial Education covers trust funding in our 'Estate Plan Review Workshop' and our Estate Planning Deep Dive course. We also recommend that families review their trust funding annually with their estate attorney.