A trust owns only what has been put into it. A revocable trust signed and filed away, with the house still in the settlor’s name and the brokerage account still in the settlor’s name, does nothing when the settlor dies: those assets go through probate exactly as if the trust had never been written. Funding is the step that moves ownership from the individual to the trustee, and it is the step most often skipped. We fund trusts for New York individuals, families and business owners, and we review trusts drafted elsewhere to find and close the gaps.
What funding is and why it matters
Funding means retitling assets so that the trust, rather than the person, is the owner: real estate, bank and investment accounts, business interests, life insurance, and personal property, with retirement accounts handled through beneficiary designations rather than retitling. Once an asset is in the trust it generally bypasses the Surrogate’s Court, stays private and passes under the trust agreement.
The unfunded trust is the most common estate planning failure we see. The family finds out after the death, when the executor discovers that the home and the accounts were never transferred and the estate needs a probate proceeding after all, with its delays, court costs, legal fees and public record. By then the person who could have fixed it is gone. Funding is the bridge between the plan on paper and the result the family was promised.
The trusts we fund
Each kind of trust has its own funding rules.
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Revocable living trusts
The most common vehicle. The settlor keeps control during life and the assets pass at death without probate. Funding means retitling real estate, bank and brokerage accounts and certain personal property into the trust’s name. See our revocable living trust page for the trust itself.
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Irrevocable trusts
Used for asset protection, Medicaid planning, estate tax reduction and charitable giving. Because an irrevocable trust cannot easily be changed once funded, the funding has to be right the first time. We fund irrevocable life insurance trusts, spousal lifetime access trusts, grantor retained annuity trusts and similar vehicles.
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Medicaid asset protection trusts
Given the cost of long-term care in New York, these have become standard. Funding usually means transferring the family home or investment accounts into the trust, subject to the five-year look-back for nursing home Medicaid eligibility. An imprecise transfer can produce a period of disqualification.
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Special needs trusts
These let a person with a disability receive support without losing Supplemental Security Income or Medicaid. Funding has to satisfy both federal and New York rules.
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Testamentary trusts
Created by a will and funded only after death and probate. The funding question here is one of drafting: the will and the trust provisions must be coordinated so that the assets actually flow into the trust as intended.
How each kind of asset goes in
| Asset | How it is funded | What to watch |
|---|---|---|
| Real estate | A new deed to the trustee, executed with the statutory formalities and recorded with the clerk of the county where the property is located. | Real property transfer tax and the exemption forms; the effect on an existing mortgage; title insurance coverage; homestead protections. |
| Bank and investment accounts | Retitled into the trust’s name on the institution’s own forms. Each bank and brokerage has its own procedure. | Beneficiary designations on the account must be coordinated with the trust so that they do not undo it. |
| Business interests | Assignment of S corporation shares, LLC membership interests or partnership interests to the trustee. | Transfer restrictions in the operating or shareholder agreement; tax consequences of the transfer. |
| Life insurance | Ownership of the policy transferred to an irrevocable life insurance trust so that the death benefit is outside the taxable estate. | The trust, not the settlor, must own the policy and be its beneficiary. |
| Retirement accounts | Generally not retitled into a revocable trust because of the income tax consequences; the beneficiary designation is coordinated with the plan instead. | A designation that names the wrong person or no one at all. |
| Tangible personal property | A general assignment of personal property or a bill of sale for jewelry, art, collectibles, vehicles and household goods. | High-value items may call for separate documentation. |
How the funding process runs
Inventory
We list every asset: real estate, financial accounts, business interests, retirement accounts, life insurance and personal property.
Strategy
Based on the goals and the type of trust, we decide which assets go in, in what order, with what tax consequences, and how the funding fits the rest of the estate plan.
Documents
We prepare the deeds, assignments and transfer forms.
Execution and recording
We supervise signing, notarization and witnessing where required, and see that deeds are recorded.
Third parties
We deal directly with banks, brokerages, insurers and business partners to complete each transfer.
Verification
We confirm that every asset has actually been retitled and give you a funding summary for your records.
Maintenance
As you buy, sell or change institutions, we keep the trust funded.
The mistakes we see most
| Mistake | Consequence |
|---|---|
| Deed never recorded | A deed to the trust must be recorded with the county clerk to be effective against third parties. |
| Beneficiary designations ignored | Retirement accounts, life insurance and similar assets pass by designation regardless of the trust. An uncoordinated designation defeats the plan. |
| Due-on-sale clause triggered | Moving mortgaged property into certain trusts can technically let the lender call the loan, though federal law protects many revocable trust transfers. |
| Tax consequences overlooked | Careless funding can trigger New York real property transfer tax, gift tax exposure or the loss of a tax benefit. |
| New assets never added | Funding is not a one-time event. Assets acquired after the trust is signed must be titled to it or coordinated with it. |
| Generic forms | Online templates often fail New York’s requirements and create the problem they were meant to prevent. |
New York specifics
New York imposes a real property transfer tax on many conveyances, and New York City adds its own. Transfers to a revocable trust are commonly exempt, but the exemption is claimed on forms that must be completed and filed with the deed. The Estates, Powers and Trusts Law governs the creation, operation and termination of trusts; the Surrogate’s Court rules, the separate New York estate tax and the Department of Health’s Medicaid regulations all affect how a trust should be structured and funded.
Co-op apartments are the recurring New York problem. A co-op is shares in a corporation plus a proprietary lease, not real estate, so moving it into a trust requires the board’s consent. Boards set their own requirements, fees and review procedures, and some refuse trusts altogether or insist on particular trust terms; that has to be negotiated before the trust is relied on.
Reviewing a trust you already have
Many clients come to us with a trust drafted years ago and no clear idea whether anything was ever put into it. We review the trust, check the title to each asset and complete the transfers that were missed. Fixing a funding gap during the settlor’s lifetime costs a fraction of the probate proceeding the family will otherwise face.
Questions we are often asked
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Do I lose control of my assets when I fund a revocable trust?
No. You are usually the initial trustee and keep full control: you can buy, sell, invest and spend as before. The trust supplies a framework for managing the assets if you become incapacitated and for transferring them at death.
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Will funding my trust trigger taxes?
Funding a revocable trust generally has no income, gift or estate tax consequence, because you are still treated as the owner. Funding an irrevocable trust can have significant tax consequences and should be planned first.
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How long does it take?
It depends on the assets and on how quickly the banks, brokerages and insurers respond. Simple funding can be done in a few weeks; a complex estate can take several months.
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Do I need to revisit funding later?
Yes. Review it whenever you acquire a significant asset, change financial institutions, sell property, or go through a marriage, divorce or the birth of a child.
If you have a trust and are not sure it is funded, or you are creating one and want it done properly, call us at 212-233-1233 or email [email protected].
