The Basics of Funding Trusts

Chicago Funding Trusts | Revocable Trusts and Irrevocable Trusts | Estate PlanningFunding trusts refers to the process of transferring assets from name ownership to trust ownership. In other words, Jim could transfer his property from being his own to being under the name of his trust. While this may seem like a nuanced and trivial action, funding a trust has many financial, legal and personal benefits.

The primary motivation of funding trusts is the creation of a revocable living trust. By establishing a proper revocable living trust, a client may also successfully manage to avoid probate. A revocable trust alone does not avoid probate. Only the specific process of funding trusts manages to evade the probate process since the property is placed outside of name ownership. The small delineation between assets being placed under Jim’s name and being placed under the name of Jim’s trust is what ultimately decides whether assets will pass under probate.

The revocable trust can include any number of assets, such as real estate, stocks and bonds, personal possessions, a bank account or other important items. The two important exceptions to permissible assets for the revocable trust are a retirement account and life insurance. All proper assets, whether physical or intangible, will only effectively avoid probate after funding the trust. In some cases, individuals will need to fund the trust more than once in order to account for updates to the included assets of the revocable trust.

Funding a trust should ideally take place the day that the trust is created, since an unfunded revocable trust has no extrinsic value. Our Chicago estate planning attorneys can provide legal counsel to individuals, families and business in funding trusts to keep their revocable trusts active. In the process, our estate planning law firm can advise clients when to consider constructing a revocable trust and funding this trust and when to consider pursuing the probate process instead.