You Signed a Trust. But Did You Put Anything in It?
A living trust can be an important part of an estate plan. It can explain how property should be managed during your lifetime and who should receive it after you die. However, signing a trust does not automatically mean that everything you own becomes part of it.
For the trust to work as intended, the property you want it to control needs to be connected to it. This process is called funding the trust.
What does funding a trust mean?
Funding a trust means taking the steps necessary to place property into it. Depending on the asset, this may involve changing ownership records or transferring the property to someone acting as trustee. The process can be different for a house than it is for a bank account.
The trustee is the person responsible for managing the property held in the trust. With a revocable living trust, the person who creates it often serves as the trustee during their lifetime. They generally keep the ability to make changes to the trust and manage its property.
In Iowa, section 633A.2101 recognizes several ways to create a trust. These include transferring property to another person as trustee or declaring that property you already own is held by you as trustee. This means that placing property in a trust does not necessarily require giving someone else control of it.
What happens if property is left out?
For example, suppose someone creates a living trust because they want their house and savings account to pass according to its instructions. They sign the document but never complete the steps needed to put those assets into the trust.
Assume the house and account remain in that person’s name alone, with no beneficiary or other arrangement allowing them to pass directly to someone else.
When the person dies, those assets may still need to go through probate. The person taking over as trustee cannot simply assume that the trust controls them because the owner intended to transfer them.
Other property may pass outside probate through a separate arrangement. Life insurance and retirement accounts, for example, commonly pass to a named beneficiary. Creating a trust does not automatically change who receives those assets.
Does a pour-over will fix this?
A pour-over will can help address property that was left outside the trust. It directs property covered by the will into the trust after the person dies.
Iowa Code section 633.275 allows a will to leave property to the trustee of an identified trust when the law’s requirements are met.
However, a pour-over will does not automatically avoid probate. Property passing through the will may still need to go through estate administration before it reaches the trust. The trust can then control how that property is managed or distributed.
What should you check?
If you have a living trust, it helps to know which assets are actually part of it. Review ownership records, beneficiary designations, and any documents showing that a transfer was completed.
Ask the attorney who prepared your estate plan which assets should go into the trust and what steps are needed. Different assets may need different treatment, so changing every account to the trust should not be treated as an automatic next step.
It is also important to review the plan when you acquire new property. A trust created several years ago may not account for a new house or account unless the necessary steps have been taken.
Signing the trust is one part of the process. Making sure the intended property is held in it helps the instructions you wrote work the way you expected.
Tyler ThompsonAuthor