If you have a living trust for your estate plan, there is one essential step that is easy to overlook. In order to be valid, a trust must be “funded” or have some viable asset that is contained in the trust. This can be a life insurance policy that names the trust as beneficiary, or a bank account that is ‘owned’ by the trust. If you are trustee as well as beneficiary, you will still have control over the asset, so it is a simple legal step to change the title and ownership to that of the trust.
The reason for this funding requirement is that when the trust is created there is a present transfer of ownership, so there has to be some asset in the trust to be transferred. Of course, funding can occur at any time, but don’t put it off too long or you risk losing the benefits of the trust document, and your assets will have to go through probate.