Trust Funding & Retitling
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TRUSTS & ASSET PROTECTION
Trust Funding and Retitling in Kentucky
An unfunded trust is a stack of paper. It is the most common and most expensive failure in estate planning, and it happens to people who did everything else right: they took advice, they paid for a proper trust, they signed it, and then nobody changed the ownership of anything.
A trust controls only what has actually been transferred into it. If the deed to your home still names you personally, the house is not in the trust. If the brokerage account is still in your own name, it is not in the trust. At death those assets pass under your will, through the probate court you paid a trust to avoid.
Funding is the work that makes the document real. We do it with clients rather than handing over a checklist, and we review existing trusts drafted elsewhere to find out whether they were ever funded at all.
If you have a trust and are not certain it was funded, that is worth an hour. Call (502) 348-2108.
What Funding Means
Funding is the process of changing the legal ownership of your assets from you personally to the trustee of your trust. It is not the same as listing assets on a schedule attached to the trust document, which is something people frequently mistake for funding.
For real property it means a new deed, signed and recorded in the county where the land sits. For bank and brokerage accounts it means retitling the account into the name of the trust. For a business interest it means an assignment. Each asset class has its own mechanism.
For an irrevocable asset protection trust, funding does something further: it starts the clock. The sixty-month Medicaid look-back runs from the transfer, so a trust signed in 2026 and funded in 2029 gives you a look-back that expires in 2034, not 2031. Delay in funding is delay in protection.
How Kentucky Assets Are Transferred
The mechanics differ by asset, and the details are where funding goes wrong.
Real property
A new deed conveying the property to the trustee, prepared and recorded with the county clerk where the land lies. It must satisfy KRS 382.130 on acknowledgment and KRS 382.135 on content, which requires the full names and mailing addresses of grantor and grantee, a statement of consideration or of gift with the estimated fair cash value, and a sworn consideration certificate signed by both parties. A deed missing the grantee signature on that certificate is one of the most common recording rejections in Kentucky. See deed preparation.
Accounts, policies and business interests
Bank and brokerage accounts are retitled with the institution, which will normally want a certification of trust rather than the full trust document, so your terms and beneficiaries stay private. Life insurance and annuities are usually handled by beneficiary designation naming the trust rather than by retitling. Business interests are assigned, subject to whatever the operating agreement or buy-sell provisions require. Vehicles are generally left out of a revocable trust in Kentucky unless there is a specific reason.
Retirement accounts are the important exception. Retitling an IRA or 401k into a trust can be treated as a full distribution and trigger income tax on the entire balance. These pass by beneficiary designation, and naming a trust as beneficiary is a decision with real tax consequences that should be made deliberately rather than by default.
What We Do
Build the asset inventory
A complete list of what you own and exactly how each item is currently titled, which is usually the first time anyone has assembled it in one place.
Prepare and record the deeds
For every parcel of Kentucky real property, filed in the correct county, with the recorded copy returned to you.
Retitle accounts with you
Institution by institution, with the certification of trust each one will ask for.
Review beneficiary designations
Retirement accounts, life insurance and annuities, deciding deliberately which should name the trust and which should not.
Decide what stays out
Not everything belongs in a trust. We record what was deliberately left out and why, so nobody later mistakes a decision for an oversight.
Provide a written funding record
A document showing what went in, what stayed out, and what remains to be done, so you and your successor trustee can both see the position.
Funding Is Not a One-Time Event
The most common way a properly funded trust becomes an improperly funded one is simply the passage of time.
Property bought after the trust was signed has to be titled into it deliberately, and buyers frequently take title personally without thinking. New accounts opened at a different bank are opened in an individual name. An inheritance received years later sits outside the trust unless someone moves it.
Refinancing is the one that catches people most often. A lender will sometimes require a property to be taken out of a trust to complete a refinance, with an assurance that it can go back in afterwards. It often does not go back in, and nobody notices until the property is being probated.
The practical answer is a review every few years, and a habit of asking one question whenever anything significant changes hands: does this need to be in the trust? See plan review and amendment.
Signs Your Trust May Not Be Funded
If any of these is true, have it checked.
01
You have never signed a deed since the trust
If your home was to go into the trust and you have not signed and recorded a deed, it is not in the trust. A schedule attached to the trust document does not transfer real property.
02
Your account statements still show your own name
Look at how the accounts are actually titled. A properly funded account will name the trustee of the trust, not you personally.
03
You refinanced after signing the trust
Check whether the property went back in. This is the single most common way a funded trust becomes unfunded.
04
You have bought property since
New acquisitions do not join the trust automatically. Each has to be titled into it.
05
Nobody has ever asked you for a certification of trust
If no institution has requested one, it is a fair sign no account was ever retitled.
Checking is quick and the answer is usually clear from a deed and a couple of statements. Call (502) 348-2108.
Funding an Irrevocable Asset Protection Trust
Where the trust is an irrevocable Medicaid asset protection trust rather than a revocable living trust, funding carries additional weight, and the timing matters more than anywhere else in this work.
The transfer into the trust is the event the sixty-month look-back measures from. Until the assets are actually transferred, nothing has started. Families who sign a trust and then take a year to get round to the deed have given away a year of protection for nothing.
What goes in also has to be chosen carefully, because you cannot reach trust principal afterwards. Funding an irrevocable trust with money you later need is a problem without a good solution, so the selection deserves as much thought as the drafting.
And the deed itself must be right. A defective or unrecorded deed does not merely create an administrative problem; it means the transfer the whole plan depends on may not have happened. See Medicaid asset protection trusts.
- Real property: a new deed, recorded in the correct county
- Bank and brokerage accounts: retitled with a certification of trust
- Life insurance and annuities: usually by beneficiary designation
- Business interests: assigned, subject to the operating agreement
- Retirement accounts: generally not retitled, handled by designation
- Newly acquired assets: titled into the trust deliberately
- After a refinance: confirm the property went back in
Trust Funding in Bardstown and Louisville
Thomas Hamilton has been admitted to the Kentucky bar since 2011 and has focused on elder law and estate planning since 2014. He is a member of the Kentucky Bar Association Elder Law Section and the National Academy of Elder Law Attorneys.
We prepare and record deeds and complete funding for clients across Nelson, Bullitt, Washington, Marion, Larue, Hardin, Anderson, Spencer and Jefferson counties, from 117 E. Stephen Foster Avenue in Bardstown and the First Trust Centre, 200 S. 5th Street in Louisville.
We are glad to review a trust drafted by another office to establish whether it was ever funded. The initial consultation is free. Schedule a consultation.
Funding Failures We Correct
The schedule mistake
Listing assets on a schedule attached to the trust and believing that transfers them. It does not. Real property needs a deed; accounts need retitling.
The deed that was never recorded
Signed, put in a folder, never filed with the county clerk. An unrecorded deed is a serious problem and an easily avoided one.
The refinance that was never reversed
Property taken out of the trust for a lender and never returned. Extremely common and usually discovered at probate.
The retirement account moved into the trust
Retitling an IRA or 401k can trigger income tax on the entire balance. These are handled by beneficiary designation instead.
Assets acquired afterwards
A second property, a new account, an inheritance. None of them join the trust on their own.
Funding an irrevocable trust too slowly
The sixty-month clock runs from the transfer, not from the signing. Every month of delay is a month of protection lost.
FREQUENTLY ASKED QUESTIONS
Common Questions About Trust Funding
What does it mean to fund a trust?
Funding means changing the legal ownership of your assets from you personally to the trustee of your trust. Real property is transferred by a new deed recorded in the county where it sits; accounts are retitled with the institution; business interests are assigned. Listing assets on a schedule attached to the trust document does not transfer them.
How do I know whether my trust was funded?
Look at how things are actually titled. Check the recorded deed for your home, and look at your account statements to see whether they name the trustee of your trust or you personally. If you have never signed a deed since creating the trust, or no institution has ever asked you for a certification of trust, that is a strong indication it was never funded.
Should my retirement accounts go into the trust?
Generally not by retitling. Transferring an IRA or 401k into a trust can be treated as a full distribution and trigger income tax on the entire balance. These pass by beneficiary designation instead, and whether to name the trust as beneficiary is a decision with real tax consequences that should be taken deliberately.
What happens to assets I buy after the trust is signed?
They do not join the trust automatically. Each new asset has to be titled into it, and this is one of the main reasons a trust that was properly funded at the outset drifts out of alignment over time. Refinancing is the most common culprit, since lenders sometimes require property to come out of a trust and it is often never put back.
Does funding matter as much for an irrevocable asset protection trust?
More, because the transfer is what starts the sixty-month Medicaid look-back. A trust signed but not funded has started nothing. Every month between signing and funding is a month of protection given away, which is why we complete funding as part of the engagement rather than leaving it with the client.
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CONTACT
Make Sure the Trust Actually Owns Something
A trust that was never funded fails silently, and the family finds out at the worst possible moment. Call attorney Thomas Hamilton at (502) 348-2108 or use the form below.
Phone:
Address:
117 E. Stephen Foster Avenue, Bardstown, KY 40004