You signed the trust. Now you have to fund it.

Creating a trust is often viewed as the finish line of estate planning. You meet with an attorney, review the documents, sign them and walk away feeling like an important box has been checked. There is another step that is just as important and is often overlooked: funding the trust.

A trust document can be beautifully drafted and carefully designed to accomplish a family's estate planning goals. If the assets that the trust is supposed to control are never actually transferred to the trust, the document may not accomplish what the family intended. Signing the trust is step one. Making sure the appropriate assets are actually connected to the trust is step two.

A trust is only as effective as its funding

Think of a trust as a legal framework that provides instructions for how assets should be managed and distributed. The trust document explains who is in charge, who can benefit from the assets and what should happen under various circumstances, but the trust needs assets to operate.

For example, suppose a married couple creates a revocable living trust with the intention of avoiding probate and making the eventual settlement of their estate easier for their children. They sign the documents but never retitle their investment accounts, bank accounts or real estate into the trust.

Years later, one spouse passes away. The family assumes everything is covered because the parents created a trust. If significant assets were never properly transferred to the trust, those assets may not be governed by the trust in the manner the parents expected. Depending on how those assets are titled and whether they have beneficiary designations, some may still have to pass through probate or be distributed under a different set of instructions.

The trust exists. The plan does not necessarily work as intended.

Funding the trust means moving the right assets

Funding a trust generally means changing ownership or beneficiary arrangements so that the appropriate assets are connected to the trust.

For a revocable living trust, this might involve retitling taxable investment accounts and bank accounts in the name of the trust. Real estate may require a deed transferring ownership to the trust and recording that deed appropriately. Business interests may require additional documentation and should be coordinated with the governing documents of the business.

The process is not necessarily identical for every asset. Retirement accounts such as IRAs and 401(k)s generally should not simply be retitled in the name of a revocable trust because retirement accounts have their own ownership and beneficiary rules. Instead, beneficiary designations need to be coordinated with the overall estate plan.

This is where the estate planning attorney, financial advisor, CPA and other professionals may need to work together. The goal is not simply to create a trust. It is to make sure the ownership and beneficiary structure of the family's assets actually aligns with the trust and the broader estate plan.

Beneficiary designations matter, too

One of the most common mistakes is assuming that the trust automatically controls everything once it has been signed.

Assets such as retirement accounts, life insurance policies and annuities generally pass according to their beneficiary designations. If the beneficiary designation says that an asset goes directly to an individual, the trust may not control that asset simply because the person also has a trust.

That can be perfectly appropriate. In many cases, assets should pass directly to a spouse or children, but the beneficiary designation needs to be intentional.

Consider someone who creates a trust with detailed instructions about how an inheritance should be held for a child. If that person then names the child individually as the beneficiary of a retirement account, the retirement account may pass directly to the child rather than into the trust. The trust may contain excellent asset protection provisions, but those provisions cannot necessarily protect an asset that never enters the trust.

The lesson is simple: the estate plan needs to be coordinated across account ownership and beneficiary designations.

The funding process should be a checklist

After a trust is signed, families should not simply put the documents in a safe and move on. There should be a deliberate process for reviewing the assets that are supposed to be connected to the trust.

That may include reviewing bank accounts, brokerage accounts, real estate, business interests, personal property and other assets. Retirement accounts, life insurance and annuities should have their beneficiary designations reviewed as well.

It is also important to revisit the plan when significant financial changes occur. A new investment account, the purchase or sale of real estate, the creation of a business, an inheritance or a major change in family circumstances can create assets or relationships that were not part of the original estate plan.

In other words, funding a trust is not necessarily a one-time exercise. It is part of an ongoing estate planning process.

The same problem can happen with a simple asset change

Even families who properly fund a trust when it is created can accidentally undo part of the plan later.

Imagine that a couple has all of their taxable investment accounts titled in the name of their trust. Several years later, they open a new brokerage account because they want to invest in a different strategy. The new account is opened individually rather than in the name of the trust.

The family may never think about it again. But years later, that account could be sitting outside the structure they spent time and money creating.

This is why estate planning should be viewed as an ongoing process rather than a folder of documents. The documents establish the framework, but the family's actual financial accounts and assets need to remain coordinated with that framework.

Don't let the legal documents create a false sense of security

One of the most dangerous aspects of an unfunded trust is that everything can appear to be in order. The family has an attorney drafted document. Everyone has signed it. It may even be several hundred pages long.

The question that ultimately matters is: What assets does the trust actually control?

A trust that is not properly funded may not accomplish the probate avoidance, asset management or wealth transfer goals that motivated the family to create it in the first place.

This is why I often think of estate planning as having two distinct steps. Step one is creating the legal documents. Step two is making sure the assets are properly titled and the beneficiary designations are coordinated with those documents.

The bottom line

Creating a trust is an important step, but signing the trust is not the end of the process. In many ways, it is the beginning.

Once the documents are executed, families should work with their attorney and financial professionals to identify which assets should be transferred to the trust, which assets should remain outside the trust and how beneficiary designations should be structured. The goal is to make sure the legal plan and the financial plan actually work together.

The best estate planning document in the world cannot control an asset that was never properly connected to it.

Don't just sign the trust. Fund the trust and then periodically review it to make sure your assets are still aligned with the plan.

Reid Schwartz is a columnist for The Item and co-founder of Creech Schwartz Wealth Management &Partners in Sumter, where he works as a financial advisor helping individuals, families, businesses and nonprofits plan for long-term financial success.

*Tax and accountancy services are not available through or provided by Creech Schwartz Wealth Management or &Partners LLC.

This article is for educational purposes only and not to be interpreted as tax or legal advice. Any tax planning strategies discussed by Creech Schwartz Wealth Management will be in conjunction with your tax/legal professional.

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