The Legal Necessities of Funding a Revocable Trust Correctly

The Importance of Funding Your California Revocable Trust Correctly

Creating a revocable trust can reduce costs and stress for your loved ones, allowing the assets in the trust to avoid probate. If done correctly, it allows for the smooth transfer of assets to your chosen beneficiaries. In California, if you fail to fund a trust correctly, you could leave part or all of your estate open to probate and legal disputes, undermining the reason the trust was formed in the first place.

What Is a Revocable Trust?

Trust: A legal tool where one individual (the “trustor”) gives another person (the “trustee”) the responsibility to manage assets for the benefit of others (the “beneficiaries”).

Revocable Trust: Also called a revocable living trust, a revocable trust is active as an entity to hold assets or property while the grantor is still alive. It is configured so the grantor can revoke or change the specifications of the trust at any time during their life. The trust’s assets are automatically transferred to the beneficiary when the grantor passes away.

What Does It Mean When a Revocable Trust is Funded?

A revocable trust is funded by transferring assets from your name, the grantor, to the name of the trust. You are essentially placing those assets into the trust’s care. Even if you maintain your status as trustee of the trust where you are in control of their management, you no longer own those assets as an individual. This process is called retitling assets and can cover such valuables as:

Bank accounts
Investments
Life insurance
Retirement accounts
Business interests
Real estate

How Should I Name My Revocable Trust?

Considering that any assets you wish to place in a trust will be retitled to the trust, the trust’s name does require some thought. Legally, you can name a trust anything, but a few basics help to establish a logical name that is easy to remember and will be practical when transferring assets.

Include your name or a portion of it
Include what type of trust it is
Include the date of signing

Some examples of practical trust names are as follows:

Joseph and Nancy Wilman Revocable Trust dated 2/15/2025
Samson Family Living Trust dated 5/10/1990
John and Sally Smith Revocable Living Trust 2035

How Do I Retitle Property to My Revocable Trust?

While each asset may be different, the key action is to take the document that states the asset’s owner and have this legally changed to the name of the trust, with your name as the trustee. For example, if John Smith created the Smith Family Living Trust 2025 and appointed himself trustee, a new or revised property deed would be signed: “John Smith, Trustee of Smith Family Living Trust 2025.”

What Are Some Common Mistakes to Avoid When Funding a Revocable Trust?

Not funding the trust at all. Some people new to estate planning or who used a DIY approach may not realize they must place their assets in the trust for it to function. Without retitling your assets to the trust, it is just an empty shell that will not protect your assets when needed.
Funding the trust only partially. By failing to make a comprehensive list of all assets and systematically transferring their titles to the trust, you may have left too many assets outside the trust, subject to probate. The portion of your estate not covered by the trust will still have to go through the public court probate process. Instead of being distributed as you intended, it could be given away based on your next-of-kin, as covered in California Probate Code §§ 6400 – 6414.
Using an incorrect trust name on documents. A simple error such as incorrectly spelling the trust name can lead to legal difficulties when defining what property and assets fall under the trust’s protection.
Altering the trust name and failing to update asset documents to match. A revocable trust can be changed anytime while the grantor is still living. If you decide to change the trust name, just be wary; you must change the name on the ownership documents for everything the trust owns. Failure to do so could leave assets “owned” by a non-existent entity.
Failing to update the trust. If your trust was fully and correctly funded when it was formed, it may not stay that way forever. If you buy new property, invest, or sell assets, your trust documents should be updated to reflect this.
Failing to add a “pour-over” clause in your will. A “pour-over” clause in a will can specify that any assets that didn’t make it into your trust before your demise should be “poured over” into your trust upon your death. This way, even if the trust assets haven’t been updated as recently as you would like, they are still covered by the trust.

Can I Fund My Living Trust with Personal Property?

Yes. Personal items like jewelry, art, and household goods can be placed in your trust. This is done by including a “Schedule of Assets” that lists the personal effects you want to transfer to the trust’s ownership. Each listing should describe the item in detail to avoid confusion. Rather than “jewelry,” one line item should have a full description, such as: “14k gold chain with rose-shaped pendant of rubies and emeralds.”

If I Don’t Fund My Trust Correctly, What Will Happen?

Failing to fund a living trust correctly opens the door to distributing your assets against your wishes. You will also force your family members to go through the long and expensive public processes of the California Probate Court. Probate can take from 12 to 18 months or longer. If there are any questions about the distribution of assets, it could lead to disputes between family members. There are less expensive options to handle disagreements, such as Alternative Dispute Resolution—but your trust can avoid family disagreements, which are even more stressful when grieving.

Protect Your Assets and Your Future with Cava & Faulkner

Don’t let legal loopholes cause the bricks of your estate planning fortress to collapse. At Cava & Faulkner, our experienced and knowledgeable estate planning attorneys are meticulous about details and provide a client-centered approach. Your concerns and questions will be addressed, and we’ll handle the challenging aspects, so you don’t have to. Give yourself peace of mind. Call us at 916-831-7565 for your initial consultation today. It’s free.