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What happens when a Living or Revocable Trust is not funded?

| May 19, 2014 | Probate |

If the Settlor does not take the steps necessary to fund a Living Trust, in most instances a probate will be necessary in order to allow the transfer or liquidation of the Settlor’s assets. This would apply to most assets which are titled only in the Settlor’s name and which do not have a beneficiary or a POD designation.

In Florida, when a person establishes a Living Trust (also sometimes called a “Revocable Trust” or an “Inter Vivos Trust”), they must take steps to “fund” the Trust, i.e. they must take steps to assure that their assets or property get into the Trust either by transferring ownership of the assets into the name of the Trust or by designating the Trust as beneficiary or as what is sometimes called a POD (“pay-on-death”) designation. Not accomplishing this funding can result in probate.

For example, consider a person who establishes a Trust and owns a home, some savings bonds, and a stock brokerage account. If, at the time of Settlor’s death, all of these assets have not been transferred into the Trust, i.e. they are still titled solely in the Settlor’s name, then a probate likely will be necessary in Florida. The only exception might be on the stock brokerage account-if there happens to be a named POD designation.Merely referring to an asset in the Trust instrument does not accomplish the funding.

Because avoiding probate is one of the main reasons people establish a Living Trust, not funding the Trust and ending up in probate can be both exasperating as well as expensive and time-consuming. When working with an experienced estate lawyer, a client can get the advice needed to fund the Trust.

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