The Importance of Funding Your Living Trust


By Christopher J. Godfrey


You just brought home your brand new living trust. It looks great, and you got it at a bargain price. But like everything else in life you get what you pay for. And like everything else there are things that work and things that don’t. How do you know your plan will work?


You may have been told to fund your trust. Good, because in order for your trust to control your assets, your assets must be in your trust. This process is called “funding”. Fully funding your trust is critical in making your estate plan work. Funding includes the proper titling of assets and beneficiary designations. 


Every asset type is different, and is handled differently when it comes to titling. For example, checking accounts are titled by the name on the account signature cards, houses are titled through property deeds, cars and boats through certificates of title, and so on. Retirement plans and pensions are funded through their beneficiary designations, whether as a primary or contingent beneficiary.


Failure to properly fund your trust will cause unintended results, which could include probate, loss of trust protections, distributions not in accordance with your instructions, additional taxes and additional administrative and legal expenses.


Reasons for incomplete funding


There are many reasons for unfunded trusts. Sometimes people are not told that they need to do it, and if they are told they may have received very limited instructions. Perhaps their estate planner even helped by creating new deeds for their real estate, but left them to fend for themselves on everything else. And lastly some people get so focused on upfront costs that they fail to consider the overall cost of their plan.


Costs of estate planning


If you have property and loved ones, you will need an estate plan. But what will it cost? Generally there are three costs in estate planning: the cost of creating your plan; the cost of updating your plan (or the cost of failing to update it); and the cost of mental disability or death.


A fully funded living trust-based estate plan might cost more up front than an unfunded trust or a will based plan. But the overall cost of a fully funded living trust-based estate plan is substantially less than an unfunded trust or a will. An unfunded trust or will-based plan can be cheap to set up, but they will result in substantial fees after your death, including probate. Average probate costs in the U.S. are reported to be 3 to 5 percent of the value of your gross estate. The overall cost of a fully funded trust-based estate plan and (regularly updated) is closer to 1 percent. And yet rare is the person who asks their attorney how much their estate will be charged after they are gone.


In an effort to save up-front estate planning costs, we might be tempted to fund our own trust without the assistance of a qualified estate planning professional. This is unwise. Experience has shown that it is never done well. Like cleaning closets at home, the complete funding of trusts just never seems to get done.  For example, during our lifetime we accumulate stuff. And while the stuff does get put away, it is rarely organized. Soon the closets are full and something must be done. Occasionally we make an attempt to clean them, but before we can finish the job, we get distracted by something else and we never return to it.


Powerful Incentives


Fully funding our trust during lifetime provides us the valuable incentive to clean out our financial closets. We can consolidate, simplify and combine our financial assets to make it easier for us to control our affairs while we are alive and well. And make it easier on our loved ones if we suffer a period of disability, or upon our death.

Funding a trust can be a tedious, time consuming process that requires a lot of follow-up and follow-through. We often hear about how much work it is to gather and assemble asset documentation, and that is before the work of the actual funding process itself, and with our own stuff too.  Image how difficult it would be for our loved ones to do this without us!


We recommend the assistance of a funding coordinator, person who knows the ins and outs of dealing with the many different financial institutions and there evolving policies, as well as how the different assets are owned. By fully funding our living trusts now, we “earn” a lower overall cost.  This savings is substantial and it more than offsets the higher upfront costs.


By fully funding our trust, we can make sure we stay in control of our property while you are alive and well; that we and our loved ones are provided for in the event of our mental disability; and when we are gone, we can give what we have to whom we want, when we want, the way we want.


That’s the plan. Now make sure it will work.

Godfrey Law Offices

2025 Edison Road

Suite B

South Bend, IN 46637-5607

(Near northwest corner of Edison Rd. and Ironwood Rd.)


T: 574-237-9000
F: 574-237-0902​

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