The Tale of the Unfunded Trust

The Tale of the Unfunded Trust

About fifty percent of the trusts that come across my desk are unfunded. Funding a trust simply means placing assets in a trust. Either by creating accounts to hold assets or by making the trust the owner of assets through titling Funding Trusts is essential to having a trust. Actually, I believe it’s the most important part of having since a trust. Since, an unfunded trust is not a trust at all, but rather a stack of papers. Here’s a cautionary tale of an unfunded trust.

The Antiquated Unfunded Trust

This trust was signed in 2007, and is an A-B Trust. This type of trust is a joint trust by a married couple for the purpose of minimizing estate taxes. Each spouse places assets in the trust and names someone else as the final beneficiary. The trust splits into two separate trusts when one spouse dies.

The person who contacted me wanted to transfer assets out of the trust, and to himself and his brother who are the beneficiaries of the trust. His father passed away in 2019; his mother several years before. The problem is, no assets were transferred into the trust. Nothing; not even the house. The county listing for the property has the house in the couples’ name as joint tenants. When drafting an estate plan such as theirs, there is almost always a pour-over will to coincide with the trust. The pour-over will funds the trust when the person dies. But the brothers, can not find the will. And since the documents are over 10 years old, the drafting attorney rightfully destroyed the documents.

Trusts can be funded by titling the property into the trust through the use of a deed.

I told the son if he wants to transfer the father’s assets to himself and his brother he’ll need to open up probate. He told me he didn’t need to open up probate because his father had a trust. I told him there’s since there’s no assets in the trust, he’ll need to probate the estate. Otherwise, he won’t be able to transfer title to the house. Perhaps even his mother’s estate as well. We went back and forth like this a couple of times, before I told him I can’t help him.


  • A trust is not a will substitute. Often people think because they have a trust, they don’t need to probate their loved one’s estate.
  • An unfunded trust is worthless. If there’s nothing in the trust, it’s not worth the paper it’s written on. Funding can occur during the life of the maker or through a mechanism such as a pour-over will or beneficiary designation. Which isn’t a bad thing in Colorado, because often the probate process is simple, moves quickly, and inexpensive. (especially if you have a self-proving will)
  • Keep up to date with your estate plan. The father should have had his estate plan redone when his wife passed away. In 2007, the A-B trust was most likely the proper document for the couple’s estate. Moreover, Colorado did away with estate taxes in 2005. The family would have been better off with an updated simplified estate plan.

I don’t want your family to make the same mistakes as these folks. The couple in this vignette had a trust which was unfunded and out-of-date. If you have a trust, fund it now or make sure you have a pour-over will to fund it later.

This article is for educational purposes only, and does not constitute legal advice about your case or situation. There may be exceptions to the information outlined above. Please consult an attorney if you have specific questions about your business or estate plan.

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