If you've created a trust as part of your estate plan, congratulations! You've taken a big step toward protecting your family's future. But here's something that might surprise you: simply having a trust document isn't enough. Without properly funding your trust, it's basically just an expensive piece of paper sitting in your filing cabinet.

I see this all the time in my practice here in Ohio. Families come to me thinking they're all set with their estate planning, only to discover their trust won't actually work the way they expected because it was never properly funded. Don't worry: this is fixable, and I'm here to help you understand exactly what trust funding means and why it's so crucial for your family's peace of mind.

What Does "Funding Your Trust" Actually Mean?

Let's start with the basics. When we talk about "funding" a trust, we're talking about transferring ownership of your assets from your individual name into the name of the trust, with you as the owner as Trustee. Think of it like moving your belongings from one house to another: you need to physically move them for them to be in the new location.

Your trust is like a container that can hold your assets, but that container starts out empty. Funding is the process of putting your assets: your house, bank accounts, investments, and other valuable property into that container.

For example, instead of owning your home as "John and Jane Smith," you'd transfer ownership to "John Smith and Jane Smith, Trustees of the Smith Family Trust dated January 15, 2024". Same people in control, but now the trust technically owns the property.

One thing that doesn't work for this is simply naming the asset in the trust, because that is not actually transferring ownership. I've seen many trusts attempt to do just this, and it fails every time.

Why Your Trust Won't Work Without Proper Funding

Here's the hard truth: an unfunded trust can't accomplish any of the goals you created it for. If you set up a trust to avoid probate, protect your privacy, or ensure smooth asset management if you become incapacitated, none of that will happen if your assets aren't actually in the trust.

I explain this part of the process to my clients by using my dogs as an analogy. I have dogs, and a fenced in backyard. If I let my dogs out the front door, they will run all over the neighborhood. If I let them out the back door, they will be controlled by the fence. A trust is like that fence, it can only control what it contains.

Let me give you a practical example. Say you create a beautiful revocable living trust with all the right provisions, but you never change the deed on your house or update your bank account registrations. When you pass away, your house and bank accounts are still in your individual name: not the trust's name. This means these assets will have to go through probate court, just as if you never had a trust at all. Your family will face the same delays, costs, and public disclosure that the trust was supposed to prevent. All because the assets weren't moved into the trust during your lifetime.

The Amazing Benefits That Come with Proper Funding

When you do fund your trust properly, you unlock all the benefits that make trusts such powerful estate planning tools:

Skip the Probate Process Entirely

In Ohio, probate can take months or even years, depending on the complexity of the estate and whether there are any disputes. Court fees, expenses of administration, attorney fees, and executor fees can eat into your family's inheritance. When your assets are properly funded in a trust, they bypass probate entirely, allowing your trustee to distribute assets according to your wishes without the delay of court involvement.

Keep Your Family's Business Private

Probate is a public process in Ohio. That means anyone can walk into the courthouse and see what you owned, how much it was worth, and who inherited what. Trust administration, on the other hand, is private. Your family's financial information stays within the family, where it belongs.

Ensure Smooth Management If You Become Incapacitated

This is one of the most important benefits of a trust that many people overlook. If you become unable to manage your affairs due to illness or injury, a properly funded trust allows your successor trustee to step in immediately and handle your financial matters. No court proceedings, no delays: just seamless management of your affairs.

Without funding, even if you have a trust, your family might need to go through guardianship proceedings in Ohio courts to get authority to manage your unfunded assets. This process can be expensive, time-consuming, and emotionally draining for your loved ones.

Common Assets That Need to Be Funded Into Your Trust

Let's get practical. What specific assets should you transfer into your trust? Here are the most common ones I see Ohio families need to address:

Real Estate: Your primary residence, vacation homes, rental properties, and vacant land should all be transferred via new deeds. In Ohio, this typically involves preparing and recording quit-claim deeds or warranty deeds.

Financial Accounts: Bank accounts, savings accounts, certificates of deposit, and investment accounts should be re-titled in the name of the trust. Most financial institutions have their own forms for this process.

Retirement Accounts: This one's tricky. You typically don't transfer retirement accounts like 401(k)s and IRAs directly into the trust, but you might name the trust as a contingent beneficiary in certain circumstances. This requires careful planning to avoid unintended tax consequences.

Life Insurance: You might transfer ownership of life insurance policies to the trust, or name the trust as the beneficiary, depending on your goals.

Business Interests: If you own a business, shares in a corporation, or interests in an LLC or partnership, these should typically be transferred to the trust, depending on your circumstances.

Personal Property: Valuable items like jewelry, artwork, collectibles, and household belongings can be assigned to the trust, though the process may vary depending on the type of property.

The Step-by-Step Process for Ohio Residents

Funding your trust isn't something you should tackle alone, but understanding the general process helps you know what to expect:

1. Start with Real Estate: In Ohio, this involves preparing new deeds that transfer ownership from you individually to your trust. These deeds must be properly notarized and recorded with the county recorder's office where the property is located.
2. Update Financial Accounts: Contact each bank, credit union, and investment company where you have accounts. They'll provide you with their forms to change the account registration to your trust's name.
3. Review Beneficiary Designations: Update beneficiary forms on retirement accounts, life insurance policies, and any accounts that allow beneficiary designations. In some cases, you'll name the trust as beneficiary; in others, you'll name individual beneficiaries directly.
4. Handle Business Interests: Work with your business and estate planning attorneys to transfer business ownership interests to the trust while ensuring compliance with any operating agreements or bylaws.
5. Document Personal Property: Create assignments that transfer valuable personal property to the trust.

What Happens If You Don't Fund Your Trust?

Unfortunately, I've seen too many families learn this lesson the hard way. When someone passes away with an unfunded trust, their family discovers that:

• Assets still have to go through probate
• Privacy is lost because probate is public
• The process takes just as long and costs just as much as if there were no trust
• The surviving spouse or family members may face complications accessing accounts
• All the time and money spent creating the trust was essentially wasted

Special Considerations for Ohio Families

Ohio law is generally trust-friendly, but there are some state-specific considerations:

Homestead Exemption: Ohio's homestead exemption provides some protection for your primary residence. When you transfer your home to a trust, you want to ensure you don't lose this protection. The good news is that Ohio law allows you to maintain the homestead exemption even when your home is owned by your revocable trust.

Property Tax Implications: Transferring real estate to your revocable living trust in Ohio shouldn't trigger a reassessment or change in property taxes, since you maintain control as the trustee.

Medicaid Planning: If long-term care planning is part of your strategy, the timing and method of funding your trust becomes even more critical. Ohio's Medicaid rules have specific requirements that can affect trust funding decisions, and mistakes can be incredibly costly.

Getting Help with Trust Funding

Trust funding can be complex, and mistakes can undo all of your hard work putting your estate plan in place. While some simple account changes might be straightforward, real estate transfers and business interests typically require professional help to ensure everything is done correctly.

The investment in proper trust funding is small compared to the problems your family could face with an unfunded trust. Most estate planning attorneys can guide you through the process or provide you with the documents you need to complete the funding yourself.

Remember, creating your trust was just the first step. Funding it is what makes all your careful planning actually work for your family. Don't let your trust become just another document in your file cabinet: take action to fund it properly and give your family the protection and peace of mind you intended to provide.

If you have questions about funding your trust or need help with any aspect of your estate planning, don't hesitate to reach out for guidance. Your family's future is worth getting this right.