What Does It Mean To Fund A Trust?

A trust is a legal arrangement where assets are managed for beneficiaries. They can be highly effective estate planning tools. Massachusetts has a wide body of law governing the use of trusts (MGL c. 203). Notably, all types of trusts generally need to be “funded” in order to become effective. This raises an important question: What does it mean to fund a trust? The short answer is that you fund a trust by transferring assets into it. Here, our Boston estate planning attorney explains what it means to fund a trust in Massachusetts.

Funding a Trust is the Process of Transferring Assets into a Trust 

Trusts must be properly funded. Broadly speaking, funding a trust involves the transfer ownership of assets into the trust’s name. It is a crucial step that ensures that the trust can effectively manage and distribute those assets according to the terms outlined in the legal document. 

What it Means to Funds a Trust Depends On the Type of Property/Assets 

What actually needs to be done in order to fund a trust? It is a case-by-case matter. The process for funding a trust in Massachusetts varies depending on the type of asset being transferred. Here is a broad overview of the key points for funding a trust:

• Assets With Formal Title: Common assets with formal titles include real property (real estate), vehicles, and financial accounts. To fund a trust with these assets, the title must be reissued in the trust’s name. In other words, they must be formally re-titled. For instance, Massachusetts real estate deeds must be updated to reflect the trust as the owner. Similarly, for financial accounts, you will need to provide the institution with the trust documentation to change ownership.
• Assets Without Formal Title: In some cases, assets without a formal title may be placed into a trust. Assets without formal titles, such as jewelry, artwork, or personal belongings, require a different approach. These are generally funded into a trust by creating a written assignment that explicitly transfers ownership of the items to the trust. While these assets do not require a formal title transfer, accurate documentation is essential to avoid disputes. 

Trusts that are Not Properly Funded Will Not Take Effect 

Without funding, the trust is essentially an empty shell, incapable of fulfilling its intended purpose. Put another way, a trust that has not been properly funded will not carry out its intended purpose. In Massachusetts, an unfunded trust has no control over assets and cannot bypass probate. It is not valid. Worse yet, serious confusions and even sharp disputes can arise over the estate plan.

Speak to Our Boston Trust Planning Attorney Today

At Fisher Law LLC, our Massachusetts trust planning lawyer provides solutions-focused legal representation to clients. If you have any questions or concerns about the funding of a trust, we can help. Call us now or contact our estate planning team today for a completely confidential case evaluation. We provide estate planning services throughout the Boston area, including in Norwood, Westwood, Walpole, and Dedham.

Source:

mass.gov/info-details/massachusetts-law-about-trusts