Signing a trust can feel like a major step towards protecting your family and organizing your assets. It is also a good way to ensure your estate can be passed down to your beneficiaries without going through the lengthy probate process. But what if your property and assets never went into it?
Here is what an unfunded trust could mean for your estate plan.
Your trustee has no trust property to manage
If you transfer no assets into the trust, your trustee has nothing to manage under its terms. The trust document may name a successor trustee and describe how to handle property, but those instructions apply only to ones held in the trust.
Your assets follow their existing arrangements
Property that remains in your name generally passes according to its ownership, beneficiary designation or will, rather than under the trust’s instructions. If no other arrangement provides similar instructions, the property may need to go through probate.
A pour-over will can direct certain property into your trust under Indiana Code § 29-1-6-2, but it generally does not avoid probate for that property.
Your trust’s distribution plan may not apply
If your trust directs a trustee to hold an inheritance for a child or distribute it over time, those terms generally will not control assets that never enter the trust. For example, an account with a named beneficiary may pass directly to that person instead of being managed under the trust’s terms.
Check whether the trust holds the property you intended
An unfunded trust may leave your trustee without property to manage and your assets subject to other transfer arrangements. Your attorney can review your trust alongside property titles, account ownership and beneficiary designations to determine whether assets reached the trust or require another plan.