The Importance of Funding Your California Living Trust

Introduction

Creating a living trust is an important step in an estate plan, but signing the trust documents is only part of the process. To help a California living trust work as intended, it generally must be properly funded. Funding a trust means transferring ownership of appropriate assets into the name of the trust or otherwise designating the trust to receive certain assets when appropriate. Without this step, the trust may not fully accomplish the goals it was created to achieve.

What Does It Mean to Fund a Living Trust?

A living trust can only manage and distribute assets that are actually connected to it. Funding a trust typically involves changing ownership of certain property, such as real estate, bank accounts, or investment accounts, so that the trust becomes the legal owner. In some situations, other assets may pass to the trust through beneficiary designations or other estate planning tools, depending on the type of asset and the overall estate plan.

If assets remain in an individual’s name instead of being transferred into the trust when appropriate, those assets may not be governed by the trust’s terms. As a result, they could require additional legal proceedings after the owner’s death or be distributed in a way that does not reflect the person’s estate planning intentions.

Why Proper Funding Matters

A properly funded living trust can help simplify the administration of assets after death and may reduce the need for probate for assets that are owned by the trust. It can also make it easier for a successor trustee to manage trust assets if the person who created the trust becomes incapacitated, provided the trust and related documents authorize that authority.

Funding a trust is not always a one-time task. People often acquire new property, open new financial accounts, or make other financial changes over time. Reviewing an estate plan periodically can help ensure that newly acquired assets are handled consistently with the overall plan. Working with an attorney can help identify which assets should be transferred to the trust and which may require a different planning approach.

Conclusion

A California living trust is most effective when it is properly funded. Taking the additional step of transferring eligible assets into the trust can help your estate plan function as intended and provide greater peace of mind for you and your loved ones. This article is provided for general informational purposes only and is not legal advice. Because every estate plan is unique, consult an experienced estate planning attorney to discuss your specific circumstances and ensure your trust has been properly funded.

Attorney Review Items

• Verify the statement that properly funding a living trust may reduce the need for probate for assets owned by the trust under current California law.
• Confirm the discussion regarding the transfer of specific asset types, including real estate, financial accounts, and beneficiary-designated assets, to ensure it aligns with current California law and best practices.
• Review the description of a successor trustee’s authority during incapacity to ensure it accurately reflects applicable trust provisions and California law.