A living trust is one of the most effective tools for avoiding probate and providing clear direction for your loved ones. However, a trust only works if it actually owns the assets it is meant to control. One of the most common and costly estate planning mistakes is creating a trust but failing to transfer assets into it.
This oversight is more common than many people realize and can undermine the very purpose of having a trust in the first place.
Your Trust Only Controls What’s Inside It
A living trust does not automatically cover everything you own. Assets must be properly retitled or assigned to the trust to be governed by its terms. If an asset remains in your individual name at the time of death, it may not be controlled by the trust even if you assumed it would be.
When assets are left outside the trust, your family may face probate, delays, and added legal expenses, despite your efforts to avoid those outcomes.
Probate May Still Be Required
If assets are not transferred into the trust, those assets may have to go through probate. In California, probate can be time-consuming, expensive, and public. Court involvement can delay distributions for months or even years and reduce the value of the estate due to fees and costs.
This often comes as a surprise to families who believed everything had been handled through the trust.
Your Loved Ones May Face Additional Stress
One of the main goals of estate planning is to make things easier for the people you care about. When assets are missing from the trust, family members may be forced to:
- Locate account records and deeds
- Petition the court for authority
- Work with attorneys to address gaps
- Navigate probate during an already emotional time
What could have been a smooth transition instead becomes a source of frustration and uncertainty.
A Pour-Over Will Is Not a Complete Solution
Many trusts are paired with a pour-over will, which directs assets outside the trust to be transferred into it after death. While helpful, this does not avoid probate. Any assets transferred through a pour-over will must still pass through the probate process before reaching the trust.
In other words, relying on a pour-over will alone does not fix the problem of unfunded trusts.
Incapacity Planning Can Also Be Affected
Failing to fund a trust does not just create issues after death, it can also cause problems during incapacity. If assets are not titled in the trust and you become unable to manage your affairs, your successor trustee may lack authority to act. This can lead to delays, financial disruption, or even court-ordered conservatorship.
Properly funding a trust allows your trustee to step in seamlessly when needed.
Commonly Missed Assets
Some assets are more commonly overlooked than others, including:
- Newly purchased real estate
- Bank or brokerage accounts opened after the trust was created
- Business interests
- Personal property not covered by an assignment
- Out-of-state real estate
Regular reviews help ensure that new assets are properly coordinated with your plan.
How to Avoid This Mistake
The best way to avoid problems is to ensure your trust is fully funded and reviewed periodically. This includes:
- Retitling real estate and financial accounts
- Assigning appropriate personal property
- Reviewing beneficiary designations
- Updating the trust when assets or life circumstances change
Estate planning is not a one-time task. It is an ongoing process that evolves as your life does.
The Bottom Line
A living trust can be an incredibly effective planning tool but only if it is properly funded. Forgetting to place assets into your trust can result in probate, delays, and unnecessary stress for your family. A careful review now can prevent significant complications later.
At The Law Offices of Eric A. Rudolph, we help clients ensure their trusts are not only well-drafted, but fully implemented. If you have a trust and are unsure whether it has been properly funded or if your circumstances have changed we are here to help guide you through the process with clarity and care.