An unfunded trust means
that the trust does not hold title to assets at death. A trust may be partially
or completely unfunded. Assets may be funded to a trust in several ways,
including legal assignment and the re-titling of accounts to the name of the
trust. For instance, a residence can be transferred to a trust by executing and
recording a trust transfer deed with the county recorder. Bank accounts can be
transferred to the trust by listing the name and date of the trust on title. The
failure to execute trust transfer deeds, legal assignments, or change in
account name forms for bank and brokerage accounts, results in a partially or
wholly unfunded trust.
In
order ensure proper trust funding, individuals start re-titling their assets
into the trust as soon as they have executed their estate planning documents.
Some assets, such as bank accounts and investment accounts, will be straightforward,
and the back office of a financial institution may be available to help with
the process. Other assets will require more effort and formal legal advice,
including real estate, intellectual property, promissory notes, closely held
business stock, and partnership interests. Check with your estate planning attorney
before signing a contract for services. Some attorneys provide no funding
assistance; others will help only with real estate and provide general answers
to questions. Certain attorneys provide comprehensive funding services for a
flat fee; still others will charge hourly for assuming responsibility for the transfer
of assets. It is a poor estate planning office indeed that fails to advise
clients about funding a revocable trust.
In addition to taking
steps to fund the trust, individuals should also leave a document trail of
proof to of intent to fund the trust. In the trust itself, there may be
separate schedule, called a “Schedule A”, which lists the assets that
individuals intend to transfer to the trust. This schedule should be signed,
dated, and perhaps even notarized to certify the testator’s intent to fund. In
addition, assets should be both particularly and generally described. In other
words, generic and specific descriptions of assets should be provided. There
may also be separate documents, including general assignments, letters, and
memoranda, which are executed in order to prove the intent to fund a trust.
