You've taken the first step in estate planning by creating a revocable living trust. However, did you know that simply creating the trust isn’t enough to protect your assets? To ensure your estate avoids probate and passes smoothly to your beneficiaries, you must fund your trust—which means transferring your assets into the trust. If you don’t, your trust is essentially an empty shell, and your family may still face the very issues you were hoping to avoid: the slow and expensive probate process, and family disputes.

In this post, we'll explain the importance of funding your trust and the risks you take if you don't. We'll look at how three specific asset types—your home, financial accounts, and life insurance policies—must be handled to make sure your trust serves its intended purpose. We'll also discuss the need for a comprehensive estate analysis to ensure all your bases are covered.

What Happens If You Don’t Fund Your Trust?

When your trust is unfunded, any assets that aren't properly transferred to the trust will likely pass through probate. Probate is a lengthy and costly court process where the court oversees the distribution of your estate. This can delay the distribution of your assets to your heirs and might lead to higher taxes, legal fees, and family tensions.

Let’s explore what could happen to different types of assets if they’re not included in your trust:

1. Your Home

For many, the family home is one of the most valuable assets. If you create a trust but fail to transfer your home into it, the home will still be subject to probate. Even though you intended for the trust to handle the home’s transfer, the court will ultimately decide its fate.

This can lead to long delays, leaving your family without a clear path forward, especially if they were planning to sell the home or move in. Additionally, legal fees can chip away at the value of the home, and your heirs might even face disagreements about how it should be handled.

How to Avoid This: Transfer the deed of your home to the trust. Your attorney can help ensure this process is handled correctly, so your home can be transferred smoothly, without court intervention.

2. Financial Accounts

Financial accounts, such as savings, checking, or investment accounts, must be retitled in the name of the trust. Without this, these accounts may pass directly to beneficiaries through a payable on death (POD) designation—or worse, they could be stuck in probate if no such designation exists.

When financial accounts go through probate, your family may experience significant delays before they can access funds. This can cause financial strain, especially if they rely on those assets for expenses or debts left behind.

How to Avoid This: Work with your bank or financial advisor to retitle these accounts under the trust. This allows for a quick and smooth transfer of your financial assets to your heirs. You can also add your trust as the payable on death beneficiary of your bank accounts.

3. Life Insurance Policies

Life insurance policies are often overlooked in estate planning. Many people assume the policy will go directly to the named beneficiary. While this is often true, if you want to ensure the proceeds are distributed in a specific way or through the terms of your trust, the policy needs to be transferred to the trust.

If the policy isn’t part of the trust, there’s a chance your beneficiaries could misuse the funds or face tax liabilities they weren’t expecting. Without trust protections in place, the proceeds from your life insurance could even be subject to creditors’ claims.

How to Avoid This: Assign ownership of your life insurance policy to the trust, ensuring that the funds will be distributed according to your wishes and protecting them from potential misuse.

Why a Comprehensive Estate Analysis Is Essential

Estate planning isn’t just about creating a trust; it’s about ensuring all aspects of your estate work together smoothly. A comprehensive estate analysis looks at every facet of your financial life, ensuring that all assets are accounted for and properly titled in your trust or other estate planning documents. This includes:

• Reviewing deeds, account titles, and beneficiary designations.

• Ensuring that business interests, retirement accounts, and personal property are properly addressed.

• Analyzing your tax liabilities to help minimize the burden on your heirs.

• Ensuring your family understands their role in your estate plan and knows how to proceed when the time comes.

Without a thorough estate analysis, even the best-laid plans can fall apart, leaving your family in the exact situation you were trying to avoid: probate, unnecessary taxes, and confusion about who’s in control.

Are You Unsure What Will Happen to Your Assets?

If you're not sure whether your assets have been properly transferred to your trust—or if you don’t even know who will be in control after you're gone—it's time to get some answers. At our firm, we offer a comprehensive estate analysis that will give you the peace of mind that your assets are protected and your wishes will be honored.

Schedule a discovery call today, and let’s make sure your estate plan is ready to safeguard your legacy, protect your loved ones, and keep your family out of probate court.