Unfunded Living Trust

An Unfunded Living Trust is a type of trust that has been created but does not hold any assets at the time of its establishment.

Typically, a Living Trust is set up to manage an individual’s assets during their lifetime and to facilitate the transfer of those assets upon their death, avoiding the probate process. However, if the trust is unfunded, it means that no assets have been transferred into the trust, which can limit its intended benefits.

For example, if an individual establishes an unfunded living trust but does not transfer real estate, bank accounts, or other assets into the trust, those assets will remain in the individual’s name. This situation can lead to complications during estate administration, as the assets will still need to go through probate upon the individual’s death.

To avoid an unfunded living trust, it is essential for the grantor (the person who creates the trust) to actively transfer ownership of assets into the trust. This process often involves changing the titles of properties, updating beneficiary designations on accounts, and formally assigning personal property to the trust.

In the context of Texas, including areas like Houston, having a funded living trust can be especially beneficial for avoiding the probate process, which can be time-consuming and costly. An unfunded living trust may result in individuals unintentionally leaving their heirs to navigate through these legal hurdles.