Most people create a trust because they want peace of mind. They want to know their assets will pass on easily once they are gone, or that if they become incapacitated, an appointed trustee can handle their affairs.
However, as the grantor of the trust, you must do more than create the trust documents. For a trust to be effective, you must also fund the trust. Funding a trust means you transfer the assets you want protected by a trust from your name to the name of the trust.
Different assets will be transferred different ways. With a car, you sign over the title to the trust. You may need an assignment document to transfer other property. An estate planning attorney can help you procure the correct documents to move assets to a trust. Though this process can be time-consuming, it is important for several reasons.
Anything outside the trust cannot be managed by the trustee
Your trustee manages your assets, if you become incapacitated. However, if you have not transferred assets into your trust, the trustee has no power to handle those assets. That means your family may need to go to court get a guardianship or conservatorship over your affairs.
Assets outside of the trust go through probate
Many people create trusts to avoid their estate passing through probate. If you do not fund your trust, these assets may have to pass through probate after your passing. Your estate will also become a part of public record, and it will slow down the process for your benefactors.
Property may not pass to your heirs
When you create a trust, you name benefactors who receive assets from your estate. If you do not move these assets to your trust, your heirs cannot receive these assets as instructed in your trust agreement. The assets could pass to joint owners or your next of kin. Some of these decisions will likely be made by the probate court.
Creating a trust assures your assets are protected in case of incapacitation, your estate will not pass through probate and your beneficiaries are taken care of. However, these things only happen if you fund the trust by retitling your assets. Otherwise, a trust document will do nothing to protect you and your family.