What Happens When a Trust Isn’t Properly Funded in Maryland?
If you’ve gone through the effort of creating a Trust, you probably felt a sense of relief. Documents signed. Notarized. Nicely organized in a binder.
But here’s the part many people don’t realize: Creating a Trust is only half the job. Funding it is the other half.
And when a trust isn’t properly funded during your lifetime, especially here in Maryland, it can completely derail the estate plan you thought you had in place.
First Things First: What Does “Funding a Trust” Mean?
When you create a revocable living trust, you (the trust creator, also called the grantor) must retitle your assets into the name of the trust.
That might include:
Your home (via a new recorded deed)
Bank accounts
Investment accounts
Business interests
Certain personal property
If the assets are not legally transferred into the trust, then the trust does not control them, even if your trust document says it should.
Think of it this way: A trust without assets is like a safe with nothing inside it.
What Happens If You Don’t Fund the Trust?
In Maryland, if assets are left outside the trust at death, they generally must go through probate in the Register of Wills in the county where you lived.
Probate is not always disastrous, but it is:
Public
Slower than trust administration
Court-supervised
Potentially more expensive
Less private
Now let’s break this down with examples.
Example #1: The House Was Never Transferred
Scenario:
Linda creates a revocable living trust in Annapolis. Her trust says her home should go to her two children equally. But she never signs a new deed transferring the house into the Trust.
What Happens?
Even though her Trust mentions the house:
The home is still legally titled in Linda’s individual name.
At her death, the house must go through probate in Maryland.
The Trust does not automatically control it.
If Linda had intended to avoid probate to simplify things for her children, that goal just failed.
Example #2: The “Pour-Over Will” Saves the Day — Sort Of
Most Maryland estate plans include something called a pour-over will. This document says: “Anything I forgot to put in my trust should be transferred into my trust when I die.”
Sounds like a safety net, right? It is — but here’s the catch:
The pour-over will still requires probate to move those assets into the trust.
So yes, the assets may end up in the trust eventually, but only after going through the Maryland probate process first.
It’s like having insurance that only pays after you’ve dealt with the problem the hard way.
Example #3: Minor Children and Unintended Consequences
Scenario:
David creates a Trust in Baltimore that says his assets should stay in Trust for his minor children until age 30. But he forgets to transfer his brokerage account into the Trust. He passes away unexpectedly.
What Happens?
Because that brokerage account was never funded into the trust:
It must go through probate.
The court may require a guardian of property for the children.
The funds could be distributed outright at age 18 under Maryland law if not properly structured.
That completely defeats David’s intention to delay distribution until age 30.
Example #4: Incapacity Issues During Lifetime
Here’s something people rarely consider.
If your trust is properly funded and you become incapacitated:
Your successor trustee can step in and manage the assets seamlessly.
But if assets remain in your individual name:
Your family may need to seek a court-appointed guardianship through a Maryland court.
That process is public and time-consuming.
In other words, improper funding doesn’t just affect what happens after death — it affects incapacity planning too.
Why This Matters Specifically in Maryland
Maryland probate has some unique features:
Probate fees are based on the value of assets that pass through the estate.
Smaller estates may qualify for simplified procedures.
Real estate located in Maryland must go through probate if not in trust (unless jointly owned or otherwise structured to avoid it).
Additionally, Maryland inheritance tax may apply in certain situations depending on who inherits (for example, non-lineal heirs).
If assets bypass your trust unexpectedly, tax planning provisions may not work as intended.
Common Funding Mistakes Seen
The home was never deeded into the Trust
One bank account was “forgotten”
Newly purchased property was not titled in the Trust
Business interests were never assigned
Beneficiary designations were not updated to coordinate with the Trust
Clients assuming funding was automatically done by their attorney or financial institution
Trust funding is not automatic. It requires deliberate follow-through.
How to Avoid the Problem
If you have a Trust in Maryland, here’s a simple checklist:
· Is your home deed recorded in the name of the Trust?
· Are bank and brokerage accounts titled to the Trust (or intentionally beneficiary-designated)?
· Are new assets being titled properly as you acquire them?
· Have you reviewed everything within the last 2–3 years?
If you’re unsure, ask your estate planning attorney for a trust funding review. It’s usually much easier to fix during your lifetime than after death.
The Bottom Line
Creating a Trust is an excellent estate planning step. But in Maryland, an unfunded Trust often means:
Probate still happens
Delays still occur
Court involvement may still be required
Your carefully drafted instructions may not function as intended
The good news? Funding a Trust properly is completely fixable while you’re alive.
And it’s one of the most important, and most overlooked, parts of estate planning.
If you live in Maryland and:
Already have a Trust but are unsure if it’s funded
Want to avoid probate in Maryland
Are dealing with a probate issue after a loved one’s passing
Need to update or review your estate plan
The attorneys at Atkinson Law are here to help.
We assist families throughout Maryland with:
Revocable living trusts
Probate and estate administration
Trust funding reviews
Estate plan updates
Asset protection strategies
📞 Schedule Your Consultation Today
Visit www.atkinsonlawyers.com or call our office at (410) 882-9595 to schedule a consultation.
A simple review today can prevent significant stress, expense, and delay for your family tomorrow.