The Empty Trust Problem: Why Creating a Trust Isn’t Enough

Revocable trusts are among the most common and valuable tools in an estate plan. The reasons are self-evident: a well-crafted trust can allow you to avoid probate (a public and sometimes lengthy process requiring court involvement); provide prompt support for you and your spouse or family if you become incapacitated; and offer flexibility, as you can amend these trusts during your life.

But creating a trust is only half the job. Unless you properly “fund” your trust— meaning, retitle assets in your trust’s name—you won’t enjoy all the benefits a trust can provide.

How do I fund my trust? 

For real property, such as your house, you can transfer title to your trust by recording a new deed. For financial accounts, your bank or brokerage firm can rename your account under your trust. For business interests, often an assignment document can transfer your interest to your trust; however, because businesses may have transfer restrictions, it’s often wise to seek an attorney experienced in business or estate planning to ensure the assignment is effective.

What assets should I transfer to my trust? 

Since every situation is unique, it’s vital to discuss the funding of your trust and the nature of your assets with your estate planning attorney. However, commonly transferred assets include:

• Real estate, including your Florida residence
• Bank and brokerage accounts without beneficiary designations
• Individual stocks and registered bonds
• LLC, partnership, and some non-publicly traded corporation interests 

What should I NOT transfer to my trust?

It is generally inadvisable to transfer the following assets to your trust without a discussion with your attorney:

• Individual retirement accounts (IRAs)
• Life insurance policies
• S-Corporation interests
• Accounts with named beneficiaries
• Jointly held assets

Will I lose control of assets in my trust? 

No. With a revocable trust, you typically serve as your own trustee during your lifetime, retaining complete control over its assets unless you become incapacitated.

What if I don’t fund my trust?

The assets you hold outside of your trust and in your sole name, without beneficiary designations, will generally require probate, where they are often transferred to your trust anyway pursuant to the terms of your Will. By funding your trust during your life, you can avoid or minimize the need for the court to serve as a middleman in this process.