Signing a revocable living trust document feels like the hard part is finished, but an unfunded trust does almost nothing to avoid probate. Understanding what funding actually means matters just as much as creating the trust itself.
What Does It Mean To Fund A Trust?
Funding a trust means formally retitling assets, such as real estate, bank accounts, and investment accounts, into the name of the trust rather than the individual’s own name. Under the Illinois Trust Code, only assets actually held in the trust’s name pass according to the trust’s terms without going through probate.
Why Does An Unfunded Trust Fail To Avoid Probate?
If an asset remains titled in an individual’s own name at death, that asset generally still has to pass through probate, regardless of how detailed or well drafted the trust document itself is. The trust only controls what it actually owns, not what the person who created it still owned personally.
What Kinds Of Assets Typically Need To Be Retitled?
Real estate generally requires a new deed transferring ownership to the trust. Bank and investment accounts generally need to be retitled directly into the trust’s name or, alternatively, designated with the trust as a payable-on-death beneficiary, depending on the institution’s specific requirements.
Do All Assets Need To Be Titled In The Trust’s Name?
No. Certain assets, such as retirement accounts and life insurance policies, are typically better handled through beneficiary designations naming the trust or individual beneficiaries directly, rather than retitling the account itself, since retitling a retirement account can sometimes trigger unintended tax consequences.
What Happens To Assets Accidentally Left Out Of The Trust?
A pour-over will is generally used alongside a trust specifically to catch any assets that were never properly retitled, directing those assets into the trust at death. Kravets Law Group pairs this backup document with every trust it drafts for exactly this reason. However, assets passing through a pour-over will still generally go through probate first before reaching the trust, which defeats much of the original purpose of avoiding probate.
What Documentation Helps Confirm A Trust Is Properly Funded?
Because funding gaps are easy to overlook, reviewing the following periodically matters considerably:
- Current deeds for any real estate, confirming the trust holds title
- Account statements showing the trust as the titled owner where applicable
- Beneficiary designation forms for retirement accounts and life insurance
- A complete inventory comparing all owned assets against what has actually been retitled
How Does This Apply To A Chicago Estate Plan?
Because an unfunded trust provides little practical benefit despite the time spent creating it, confirming that funding was actually completed matters considerably. A Chicago estate planning lawyer can review an existing trust against current asset titling to identify any gaps.
What If A Trust Was Created Years Ago And Never Reviewed?
Assets acquired after a trust was originally created, such as a new home or a newly opened account, often never get properly retitled into the trust unless someone actively follows up. A Chicago estate planning lawyer can help audit an older trust to confirm it still reflects a person’s current assets.
A trust document sitting in a drawer accomplishes very little if the assets it was meant to hold were never actually transferred into it. If you have a trust in Chicago and are unsure whether it was properly funded, reach out to our office to go over your current asset titling.