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How to Fund Your Trust

Updated: August 8, 2022

Many people believe their living trust is complete once they sign a revocable living trust document into effect. When, in fact, it’s often the first step in a more comprehensive process towards establishing a trust fund— one involving ownership transfers and retitling of certain property. As one attorney put it, an unfunded trust is not worth much more than the paper on which it’s written.1

Failing to fund a trust may have severe implications in terms of protecting the assets meant for beneficiaries of the estate and can even result in probate court proceedings, a legal action living trusts are designed to avoid. Luckily, we have compiled a guide detailing how to set up and fund a living trust.

Table of Contents

What is a Living Trust?

A living trust is a deposit account owned by one or more individuals expressing that all deposited funds and assets are to be passed to the intended beneficiaries upon the owner’s death.2 An owner of a trust may deposit monetary funds as well as real and personal property into the account via simple transfers or through retitling, the process of which is detailed below.

Trusts are typically put in place through a written living trust document, whether revocable or irrevocable, expressing the estate’s beneficiaries who are to receive all or a portion of the trust fund upon the owner’s death. In this document, vital individuals are to be named. Let’s review:

Grantor (Settlor) – The person making their trust;

Beneficiaries – A beneficiary can be any person, such as a family member or friend, or a charitable organization/entity recognized under the Internal Revenue Code2; and

Trustee(s) – The person(s) or entity responsible for managing the trust account as the owner directs. Trustee(s) distribute the trust’s property and funds to the designated beneficiaries upon the owner’s death.3

Living trusts may be revoked, terminated, or amended at any time by the grantor being of sound mind.2

Revocable vs. Irrevocable Living Trust

The first, and most obvious, difference involves the trust’s revocable status. Irrevocable trusts may not be changed or disseminated— notwithstanding certain limited exemptions— whereas a revocable living trust can be amended or otherwise terminated.4 Secondly, the owner of a trust account does not own the assets they place in an irrevocable trust. The assets are instead legally owned by the trust and managed by the trustee but not the grantor. A grantor of a revocable living trust, on the other hand, still has legal ownership rights to assets/funds that are transferred into the trust fund.

Note, a revocable living trust becomes irrevocable upon the grantor’s death.

(See more differences between the two trust options.)

Is a Living Trust a Last Will?

Both a living trust and a last will and testament are estate-planning documents, which lends to the common confusion between the two. However, despite their role in the distribution of property after death, there are several notable differences.

Probate. Living trusts automatically bypass any legal court proceedings and assign the distribution of property to the trustee. Wills, in some cases, may require a probate judge’s approval in matters of bequeathing (transferring property to heirs upon the will-maker’s death).

Property and assets. In a living trust arrangement, only the holdings in a trust account will pass to intended beneficiaries. In contrast, all the individual’s property will pass to heirs when a will is in effect.

Public Records. A living trust only becomes public record if a trustee or a beneficiary demands court approval of accounts.5 Since probate action is open to the public, wills and the instructions they contain are much less private.

(See more differences and decide which you need.)

How Can I Fund My Trust?

A trust fund, in essence, is best thought of as a deposit account. All assets, property, and financial holdings can be placed into the fund for eventual beneficiaries to receive after the grantor’s death. Beneficiaries may receive their allocated portion (if not all) of the fund in accordance with the grantor’s directions set on the living trust document. This means the distribution must abide by stipulations set by the grantor: for instance, the grantor can instruct their trustee to distribute funds in installments or if a beneficiary is a child, state the funds will only be available upon, say, the child’s eighteenth birthday.6

There are two methods in which a grantor can fund their trust:

(a) Throughout their lifetime. Using this form of capitalizing the account, the grantor can transfer assets/property to the trust fund effective immediately and while they are still alive;

(b) Unfunded until death or incapacitation. The grantor may opt to maintain the trust unfunded until their death. They would still need to transfer assets to the trust account under the provision that it take effect upon their death or mental incapacitation.7

Regardless of the route a grantor wishes to pursue, they must transfer property into the trust accordingly. All property involves a different procedure and may be subject to change across state lines. Below are some of the most common assets grantors transfer or designate to their trust.

Transferring Real Estate to a Trust

A real estate property not held within a trust is likely to face probate at the time of the owner’s death. To avoid this, owners typically transfer the real property to an existing or newly-formed living trust by way of:

  • Warranty Deed – This type of deed transfers ownership of real estate with a guarantee in the title. In other words, it ensures the seller has the legal right to transfer and clear the title of the property in full, all while certifying the property is free of easements or any liens;
  • Quitclaim Deed – The most straightforward type of deed. It requires a minimal amount of information to justify it as a legally binding document. It makes no guarantees in terms of buyer protection, which is usually a non-issue since the ownership is being transferred from one individual to their personal trust;
  • Transfer-on-Death Deed (TODD) – Only available in select states, this deed gives a grantor the ability to assign a person (or people) who shall receive the grantor’s real property upon their death. A grantor will still keep ownership of the property until the document takes effect at the time of their passing.8

Preparing a new deed enables the ownership transfer from the name of the owner(s) to that of the trust, maintaining the grantor as a trustee if transferred to a revocable trust. The grantor, in this case, continues to control the property— authorizing them to sell and derive income from the property— and they may utilize the property as they did before the transference.9 Alternatively, when uprooting to an irrevocable trust, the grantor will effectively lose control over the property, and all procured income (if any) goes into the trust.9

Placing Personal Property Into A Trust

Titled property that is not real estate, such as motorized vehicles and boats, will require a title change. Basically, the owner must initiate a title transfer in which ownership of the property moves from their name to their trust. The process differs depending on which type of property is being conveyed.

For motor vehicles, each state’s process will vary. Most states often require a transfer of the title certification with proper documentation, all of which is submitted to the agency handling vehicle records— commonly a department of motor vehicles (DMV). The same goes for boats that are registered and titled under a state government division.

Property with no official title document can be assigned in a much simpler process. A grantor may draft an assignment of property document, listing all items a beneficiary of the trust is entitled to receive.10 Among all untitled property, the following are some of the most common items:

  • Jewelry;
  • Furniture;
  • Clothes;
  • Books;
  • Computer Hardware;
  • Artwork;
  • Collectibles.

What Else Can I Transfer to My Trust?

From publicly-held stocks to interests in businesses, the list of assets subject to transfer is all-embracing. Ultimately, nearly anything worth placing in the fund can be shifted from the owner’s name to their trust.

For instance, business interests can be conveyed to a trust utilizing a document assigning all assets owned under the name of the business. Doing so establishes a title into the trust, thus resulting in these interests avoiding probate.11 Similarly, interest in a limited liability company (LLC) can be acquired by making the trust a “member” of said LLC. Both instances may require the approval of the companies’ owners(11).

Another worthwhile example comes in the form of assets such as life insurance and retirement accounts. These types of accounts do not involve reassignment or retitling. Instead, the primary or secondary beneficiaries can simply be changed to the trust.12

A Trust Fund’s Tax Implications

It’s worth noting that assets belonging to a trust fund are not owned by the beneficiaries— nor are they owned by the grantor if it is an irrevocable trust fund. This may seem like a benign formality, but it has serious tax consequences. An irrevocable trust removes the trust’s assets from the grantor’s taxable estate and avoids the tax liability on the income those assets create.13 Whereas, a grantor with revocable trust would have to report trust income on their personal tax return.14

Tax codes largely vary on jurisdiction. Therefore, it’s highly recommended to consult an attorney on tax and other matters that may affect the trust fund and its efficacy.

(Click here to begin creating your Living Trust!)


  1. www.thebalance.com/what-does-it-mean-to-fund-a-trust-3505280
  2. www.fdic.gov/deposit/diguidebankers/documents/revocable.pdf
  3. www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning/revocable_trusts/
  4. www.nycbar.org/get-legal-help/article/wills-trusts-and-elder-law/trusts/living-trusts-revocable-irrevocable/
  5. www.aarp.org/money/estate-planning/info-09-2010/ten_things_you_should_know_about_living_trusts.html
  6. www.investopedia.com/articles/pf/12/set-up-a-trust-fund.asp
  7. www.nycommunitytrust.org/newsroom/professional-notes/revocable-trusts-and-other-important-documents/
  8. www.aarp.org/content/dam/aarp/lce/resources/dc-transfer-on-death-deed.pdf
  9. www.thebalance.com/how-to-fund-real-estate-into-a-trust-3505275
  10. www.nolo.com/technical-support-main/nolo-living-trust-transferring-untitled-property-into-your-trust.html
  11. www.affinityplus.org/docs/default-source/investment-center/estate-planning/trust-funding-instructions.pdf
  12. www.thebalance.com/what-are-the-procedures-for-funding-a-trust-3505284
  13. www.investopedia.com/terms/i/irrevocabletrust.asp
  14. www.journalofaccountancy.com/issues/2017/feb/trusts-and-estates-uses-tax-considerations.html