So you’ve created a living trust. Awesome. You are super responsible. Spectacular. Your estate is so planned. Excellent.

Reveling in your excellence, you may be thinking to yourself, “You did a great job, Self. You are so responsible, and your estate plan (which is very much planned) is good to go!”

But guess what? Yourself would be wrong.

Is my trust useless?

When you sign a trust document, you just have some sheets of paper. It may be fancy paper — and it’s definitely expensive paper — but it’s still just paper. And paper alone (usually) does not avoid probate. In other words: By itself, a signed trust can be pretty useless.

Think of a trust like a box. When you sign the trust, you have an empty box. To avoid probate, you want to fill that box with all your “stuff,” your assets. Anything that’s in the box at your death doesn’t have to go through probate. Anything that’s not in the box at your death does.

This process of filling the trust-box is known as “funding” your trust. Specifically, “funding” is the term used to describe the transfer of assets from your individual name (e.g., “John Doe”) to the name of your trust (e.g., “John Doe, Trustee of the John Doe Living Trust”).

I have handled several probates where the decedent had a trust but simply forgot to transfer ownership of certain assets to the trust before they died. In the estate planning world, that is the equivalent of a Romeo and Juliet double suicide. Not literally (pun intended), but it is still super tragic.

The main advantage of trusts over wills is that a trust avoids probate. Probates — even simple ones — can cost a good chunk of money. And while attorneys would be happy to take your chunks of money, you can easily avoid doing that by properly funding your trust.

How do I fund my trust?

After you set up a trust — and it is critical that you wait until AFTER you have set up the trust — you should transfer most of your titled assets to the trust. This includes assets such as your house, car, minerals, bank accounts, brokerage accounts, stocks, etc. (There are, however, some assets you should not transfer to your house. More on that later.)

How you transfer property depends on the type of asset:

• Bank accounts. After you have set up your trust, go to your bank and tell them you want to transfer your account to your trust. First, they will probably high five you for being so responsible. Second, they will likely ask for some basic information or documents about your trust. And third, they will have you fill out and sign some simple paperwork. Easy as pie. (But, like, a no-bake pie with a really easy recipe.)

• Real estate or minerals. For this, you will have to use a deed. A deed is an legal instrument stating that you are transferring your ownership interest to someone else or, in this case, to your trust. (Cool side note: some legal documents are called “instruments” even though they don’t make any music.) You and your spouse and/or any other owners of the property will need to sign and then record the deed with the county clerk. Be sure to talk with your attorney about any possible repercussions regarding your mortgage. (Usually there are none, but it never hurts to ask.)

• Cars and other motor vehicles. Transferring a car title in Oklahoma is also pretty easy. Basically, you just need to assign the car to your trust on your existing certificate of title. Then take the certificate of title to your local tag agency, and for a small processing fee and a smile they will issue you a new, shiny (but not actually shiny) certificate of title. The same process also generally works for other motor vehicles such as boats or a Seedo.

• Untitled personal property. There is not certificate of title to your couch or your refrigerator or your mink coat. So rather than changing title at a bank or government office, you should transfer your personal property and effects into your trust by executing an assignment. Many trusts include assignment language in the document itself, but be sure to ask your attorney about this.

• Transferring new assets to a trust. If you have already set up a trust and later purchase a house or vehicle, or open up a new bank account, etc., you can actually just take title in the name of the trust right from the start. So instead of buying a car as “John Doe,” you can buy it as “John Doe, Trustee” — which sounds cooler.

There are other types of assets (e.g., certificated stock shares, business interests, mortgages, etc.) that require different transfer methods.

If you are unsure how to transfer title, a safe bet is to contact the person or institution that holds the asset (often called a “custodian,” which, sadly, does not mean they will clean your house) and ask them what you need to do to transfer that asset to the trust.

Are there any assets I should not transfer to my trust?

Although most of your assets should be owned by your trust, some should not.

For example, an Individual Retirement Account (IRA) needs to be owned in your individual name. You can name your trust as the beneficiary of the IRA, though it can be a little complex and (potentially) less advantageous. But your trust cannot be the owner.

If you are receiving Social Security which is directly deposited into your bank account, you cannot re-title that account into the name of your trust. It must remain in your individual name. However, you can open up a separate account in the name of your trust and transfer deposited funds to that new account, or you can name your trust as the pay-on-death beneficiary of the existing account.

Other types of assets also cannot be owned by a trust, so it is important you talk with your attorney and your financial advisor(s) to determine how best to treat your assets so that they can avoid probate while still complying with the law and/or maximizing tax benefits for your estate and/or your beneficiaries.

What happens if my trust is not funded?

You die. Not as a direct result of not funding your trust, but, I mean, we all die. And when you die, if assets are not owned by your trust then they may have to go through probate.

In addition to probate being a big stress and expense that your heirs will have to suffer, failing to transfer assets to your trust also means that your property may not go to the people you want to have it.

Say, for example, you are single with two kids named Harry and Ron. Harry has made some bad decisions, has the bad habit of talking to snakes, and frankly has shown a startling disrespect for authority. As a result, your trust says that Ron gets everything and Harry gets nothing.

If you do not fund your trust by transferring title to your assets, then all your assets will be subject to probate (unless you find other ways to avoid probate). Without a separate will or other estate planning device, the law says that both kids will split the estate equally — meaning Harry will receive the same inheritance as Ron.

In short, bad things can happen if you do not fund your trust. So fund it. Fund it like you have never funded anything before.

You can’t spell “funding” without “fun”.

Actually, the “funding” process can be time consuming and a little bit of a pain. But funding your trust is perhaps the most important task when it comes to carrying out your estate plan. You spent good time and money to set up a trust to avoid probate. So make sure it actually works!

For more information about estate planning or establishing a living trust to avoid probate, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.

David M. Postic is an attorney at Postic & Bates, P.C. His practice focuses on estate planning, probate, real estate, trust administration, business planning, and adoption.

You can email David through our Contact Us page or by calling our office at (405) 691-5080.

[As with all our blog posts and other publications and resources, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]