There’s an old expression: “All dressed up but nowhere to go!” This phrase has been interpreted to mean being completely prepared for an event that fails to materialize. This is sometimes true with persons who do a Revocable or Living Trust but fail to fund it. They are prepared to avoid probate but this objective–avoiding probate–fails to materialize because assets are not in the Trust at that time of death.
Having a Trust has number of advantages. A person can set up the Trust so that their assets by-pass probate. This saves on time and expense in the distribution of the person’s assets. In addition, by not going through probate, the distribution is private and not subjected to public disclosure.
To accomplish this outcome, first the person must set up a Trust–usually best done through an experienced estate planning attorney. Once the Trust is signed, the next step is to get the person’s assets into the Trust. This process is called “funding” the Trust. This requires taking action. Funding requires taking steps and does not happen just by setting up the Trust.
If a person signs a Trust but does not fund it, then the person’s assets will likely have to go through probate. This will defeat one of the most important benefits of a Trust. The assets may ultimately end up in the Trust but they will do so only after the time, expense, and inconvenience of probate. So if the person prepared the Trust–they’re all dressed up–but if the Trust is not funded, then the only place they’re going is to probate!
A real life example may demonstrate the importance of funding the Trust. We once had a client who came to us about their deceased mother’s Trust. The mother had established a Trust many years before through an attorney (not our firm!). The Trust was well-drafted and appeared to accomplish the mother’s wishes–with one big exception. The mother had never transferred anything into the Trust. In other words, all of the mother’s assets were still in her individual name. The mother had mistakenly thought that setting up the Trust automatically placed assets into the Trust. It does not! She should have either renamed her assets in the name of the Trust or, where available, designated the Trust as beneficiary. Since she had not done that, a full probate was required. A year and a half and tens of thousand of dollars later, the assets ended up in the Trust–via probate!
When setting up a Trust for a client, a good estate attorney will not only draft the Trust. The attorney will also provide instruction and assistance in getting the Trust funded. If they do not, then they have failed their client by dressing them up but leaving them with only one place to go–probate!