In the realm of estate planning, trusts generally are considered one of the most flexible and powerful tools to accomplish lifetime and legacy planning goals. However, the most common reason trusts fail is because of a lack of funding.

Funding the trust simply means the grantors, the person or people creating the trust, actually must transfer property into the name of the trust.

Think of the trust as a new entity. In order for that new entity to own anything, someone has to give it something.

The trust acts as a safe to hold the property. Depending on the type of trust, that safe may be accessible to the grantors or it may be locked to the grantors and only accessible to another person acting as trustee, who is responsible for managing the trust.

After the grantors die, if nothing has been placed into the safe, there will be nothing to give to the beneficiaries.

Three of the most commonly used trusts are the Irrevocable Trust (used for asset protection), the Revocable Living Trust and the Supplemental Needs Trust. Each of these may be funded somewhat differently.

Irrevocable Trusts used for asset protection generally are funded only partially. Because grantors fund the trust with only the money they intend to protect from potential future liabilities, grantors also should keep money accessible outside of the trust.

For that reason, grantors often transfer real estate into trusts along with large liquid accounts, but leave out small liquid accounts.

Of course, any money outside of the trust is the property that will be left at risk, but most people are willing to risk some money to keep it easily accessible.

High risk properties, such as vehicles, are left out of irrevocable asset protection trusts or placed in individual trusts separate from other properties.

For example, if an irrevocable trust owns a car, which later is involved in a wreck, the trust itself can become liable as the owner. However, high risk properties with high values, such as classic cars, should be placed in their own individual trusts.

Property left outside of the trust, such as bank accounts, easily can name the trust as the payable-on-death beneficiary. By including the trust as the beneficiary on these accounts, grantors effectively can avoid probate for loved ones, while funneling all property into one instrument with one set of instructions in the trust.

Revocable Living Trusts do not have the asset protection element for grantors and usually have grantors serving as the trustees as well. These trusts are very flexible and simple to use.

Real property and personal property should be transferred into the name of the trust. Investment accounts can be transferred easily with bank accounts either being transferred or being left to the trust as a payable-on-death beneficiary.

Supplemental Needs Trusts are the most unusual for trust funding. Supplemental Needs Trusts often are funded through a testamentary instrument, like a Last Will and Testament, a Revocable Living Trust or life insurance proceeds. It is not uncommon to have a Supplemental Needs Trust that is simply an empty trust until the grantors die and property is poured into the trust.

Do not assume that simply listing a property within the trust has transferred it. Any property that has a title or deed must have an actual title or deed transfer to be complete.

Trusts are strong tools for asset protection, probate avoidance, maintaining privacy and effectuating long-term distributions, but they can work only if there is property within the trust. A little work up front can ensure goals are accomplished later.

Cynthia Griffin is an elder law and estate planning attorney at Burnett and Griffin PLLC in Elizabethtown. She can be reached at

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