The #1 Mistake in Trust Planning in 2025
In 2025, there continues to be one major issue that people face with trust planning—regardless of whether they’ve set up a revocable or irrevocable trust. It’s the most common and significant mistake I see time and time again, and today I want to explain what that mistake is—so you can avoid it.
Revocable vs. Irrevocable Trusts: A Quick Refresher
To start, it’s helpful to remember the difference between revocable and irrevocable trusts. A revocable trust is typically used to avoid probate and maintain control of assets during your lifetime. An irrevocable trust, on the other hand, offers benefits like estate tax minimization, asset protection, privacy, and family governance. In many cases, a revocable trust eventually becomes irrevocable, or works in tandem with an irrevocable trust as part of a broader estate plan.
The Biggest Mistake: Failure to Fund the Trust
The biggest issue with trust planning in 2025 is failure to fund the trust. Simply put, clients often go through the effort of setting up a beautifully drafted trust—but never transfer their assets into it.
Why does this happen? One major reason is psychological—after completing the trust, clients feel a sense of accomplishment and relief. They believe the work is done. Attorneys often don’t manage the full implementation phase; at best, they provide a generic letter of funding instructions that the client doesn’t fully understand. Most people have never done this before, and so the instructions feel confusing or irrelevant.
What Does Funding the Trust Actually Mean?
Funding a trust means transferring ownership of your assets into the trust. Here are the key asset categories and how to properly fund them:
1. Real Estate
To move real estate (your residence, vacation home, rental property, etc.) into a trust, you must:
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Execute a new deed transferring the property from your individual name into the trust.
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Record that deed with the county clerk’s office.
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Notify your mortgage lender if the property is encumbered. Some lenders may require a copy of the deed or the trust document, while others may have no objection.
Attorneys often help prepare these deeds, but you must ensure this is completed and recorded properly.
2. Bank and Brokerage Accounts
Cash accounts (checking, savings) and investment accounts must either be:
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Retitled in the name of the trust; or
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New accounts opened in the trust’s name.
Each financial institution handles this differently. Some allow changes online; others require trust documents or in-person updates. While your attorney can guide you or field questions from the bank, you—the client—are typically responsible for making these changes happen.
3. Closely Held Business Interests
Business ownership (LLCs, S-corps, partnerships) needs to be formally assigned to the trust. This is done via:
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A Transfer and Assignment Agreement, executed by the current owner (you), and
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An Acceptance of Interest, signed by the trustee.
This process may require a review of the company’s operating agreement, partnership agreement, or shareholder agreement, which might include restrictions or formalities (e.g., requiring consent from other owners).
It’s critical that your attorney is aware of any business interests—especially if the business is created after the trust is formed—so they can help you title it correctly or amend ownership later.
4. Retirement Accounts
IRAs and 401(k)s typically should not be retitled in the name of the trust. Instead, trusts can be named as beneficiaries. Make sure beneficiary designations are reviewed and coordinated with your estate plan.
5. Life Insurance
Life insurance can be owned by a trust, especially if it’s an irrevocable life insurance trust (ILIT). However, many people make the mistake of creating an ILIT but never transferring the life insurance policy into it—rendering the trust meaningless.
Final Thoughts: A Trust Without Funding Is Useless
In conclusion, no matter how perfectly your trust is drafted, it won’t serve its purpose unless you fund it properly. The best legal strategy in the world will fail if your assets are still held in your individual name. Make sure your real estate, bank accounts, business interests, and insurance policies are aligned with your trust plan.
If you’re investing the time and money to protect your legacy and your loved ones, don’t stop short of the finish line. In 2025, funding your trust is the most critical step in making sure your estate plan actually works.