Budgeting Financial Planning Estate Planning What Is Funding a Trust? By Julie Garber Updated on March 2, 2022 Reviewed by Somer G. Anderson Reviewed by Somer G. Anderson Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. learn about our financial review board In This Article View All In This Article Definition and Example of Funding a Trust How Funding a Trust Works Do I Need to Fund a Trust? Photo: Andrew Brett Wallis / Getty Images Definition Funding a trust is the process of transferring your assets into the ownership of your trust. The trustee will have control of these assets when ownership has been transferred. Key Takeaways Funding a trust is the process of transferring your assets into the ownership of your trust. How it works will depend on the type of property.Assets that are titled in the settlor’s name or in joint names with others are retitled into the name of the settlor's revocable living trust. The trust can be designated as the primary or secondary beneficiary for assets that require a beneficiary designation. The trustee will have control of these assets after ownership has been transferred.Properly funding a trust ensures that your assets can be controlled by your named trustee and go to the correct beneficiary. They don't have to go through probate after your death. Definition and Example of Funding a Trust Funding a trust refers to moving ownership of assets that are titled in the settlor's name or in joint names with others. It retitles them into the name of the settlor's living trust. It can also involve taking assets that require a beneficiary designation and naming the trust as the primary or secondary beneficiary of those assets. The person who creates and funds a revocable living trust can be referred to as the "settlor," "grantor," "trustmaker," or "trustor." Settlors may also choose to designate themselves as trustees or beneficiaries of their revocable trust, depending on the reasons for the trust. Note These rules all apply to a revocable living trust. The settlor can't act as trustee of an irrevocable trust and, as the name suggests, has no legal right to take assets back after they've been funded into the trust. That isn't the case with revocable trusts. Funding a revocable living trust ensures that the settlor's property is governed by the terms of the trust agreement. The selected successor trustee will be able to manage accounts held in the name of the trust if the settlor becomes incapacitated. The successor trustee will be able to manage and transfer accounts held in the name of the trust to the ultimate beneficiaries named in the trust agreement after the settlor's death. How Funding a Trust Works It's not enough for the trustmaker to simply sign the trust agreement and expect that the revocable living trust will function properly. The settlor must “fund” their assets into the trust after the agreement has been signed. The trust is just a useless, empty vessel otherwise. Funding a trust involves transferring property into it. How this works will depend on the type of property you're transferring. You can transfer ownership of some assets to the trust. You may have to designate the trust as a beneficiary for others. Titled property, such as a boat, car, motorcycle, or airplane, can be transferred by establishing a new title naming the living trust as the owner. Untitled property, like jewelry and collectibles, can be moved by creating a signed and dated document called an "assignment of property." The document designates the trust as the owner. Note Untitled property can often be listed in an ownership document as broad categories of "electronics" or "furniture." These should be listed individually, however, if you're transferring particularly valuable items, such as jewelry or art. Some other assets that are commonly funded into a trust include: Bank accounts: These can vary by bank. Transferring them may involve closing an account and transferring the funds to a new account owned by the trust. Certificates of deposit (CDs): Wait until the CD matures, then open a new CD in the trust's name to avoid early-withdrawal penalties. Securities: Funding a trust with stocks, bonds, and brokerage accounts can vary by brokerage and by the type of security. Stock and bond certificates may have to be reissued with the trust as the owner. Ask your broker how to transfer ownership of these assets. Real estate: You can transfer ownership of real estate using a quitclaim deed. You may need permission to do so if you have a mortgage or belong to a homeowners' association. Note Your county or city may have additional paperwork you must fill out to legally transfer real estate ownership to your trust. Business interests: Shares in partnerships, LLCs, and corporations can be retitled in the name of the trust.Life insurance, retirement accounts, health savings accounts (HSAs), and medical savings accounts (MSAs): Designate the trust as the beneficiary for each account or policy. Speak with your lawyer or the institution that holds the asset, such as your bank or broker, if you're unsure how to transfer ownership of any property to your trust. Your assets are protected from probate once they're owned by the trust. They're under the control of the trust and any trustees you've named. Do I Need to Fund a Trust? Funding it is a critical step in the process of creating a revocable living trust. An unfunded trust is not worth much more than the paper it's written on. It's important to take the time to retitle your assets after you've taken the time to work with your estate planning attorney to create a revocable living trust that fits your particular family situation and financial needs. Note Failing to fund a trust properly can create several long-term difficulties. Assets Can't Be Managed by Your Trustee The trustee of a revocable living trust has no power whatsoever over any of the settlor's property that hasn't been retitled in the name of the trust. Your loved ones may have to establish a court-supervised guardianship or conservatorship to manage any assets that aren't held in the name of the trust if you create a trust without funding it, and then become mentally incapacitated. It's also vitally important to name a successor trustee to take over management of the trust for you in this case if you've personally been acting as trustee and are no longer mentally capable of doing so. Assets May Have to Go Through Probate Any property that hasn't been retitled into the name of your revocable living trust may have to go through probate after your death. That defeats one of the main benefits of creating a revocable living trust. Assets May Not Go to Your Intended Beneficiaries Property that's held outside of your revocable living trust can't be disposed of or passed on to beneficiaries after your death as you've provided in the terms of your trust agreement. Assets held outside of your trust may pass by intestate succession if you don't also leave a will for assets that haven't been funded into your trust. Funding your trust ensures that your assets will go where you want them to go. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. ABA Law Info. "A Primer on Irrevocable Trusts." Annuity.org. "How to Set Up a Trust." Affinity Plus Federal Credit Union. "Instructions for Transferring Assets to Trust," Page 2. American College of Trust and Estate Counsel. "Choosing an Executor or Trustee." The Elderlaw Firm. "Basics of Funding a Revocable Living Trust."