I have received a number of emails lately about funding a living trust. It's a question that seems to confuse a lot of people because there appears to be several right answers. And, there are several right answers - depending upon your reasons for establishing a living trust in the first place.

First, funding a living trust simply means transferring your assets to your trust. How you transfer assets is not the subject of this post [but see Funding a Revocable Living Trust]. Here, we're only concerned with when you should transfer assets to your trust.

The answer to that question depends upon your reasons for having a living trust in the first place. For example, let's consider one of the most important reasons for having a living trust; that is, to have someone hold and manage your assets for the benefit of your minor children - or other beneficiaries - in the event of your death.

If that's the reason you have a living trust, then you don't need to fund the trust at any time during your lifetime. If you die with all your assets in your own name, then a pour-over Will is sufficient to transfer your assets to your living trust after your death. Yes, your property will go through probate first, but that's not a major concern. Your primary concern is getting your assets into a trust upon your death so that it can hold and manage those assets for the benefit of your beneficiaries.

While that may be true, why not also avoid probate as long as the trust is in place? That's a valid question. The answer, in my opinion, is that anyone who is not particularly concerned about dying is generally not too concerned about avoiding probate - and, given the choice, they would prefer to go through probate rather than put their assets into a living trust. Generally speaking, that includes anyone under the age of 55 or so. In particular, it includes couples in their 20's, 30's and 40's who have minor children. These people aren't generally thinking about dying or becoming disabled, but they do care about taking care of their young children, especially if both parents die simultaneously in a car or an airplane accident.

Some people would argue that these people don't even need a living trust because a testamentary trust is just as good. It's true - a testamentary trust would accomplish their objective. However, most estate planning attorneys prefer to create a living trust, rather than a testamentary trust, for the following reasons. First, a testamentary trust is created under a Last Will and Testament ("Will") and, if you want to change the terms of your testamentary trust, you have to make a formal change to your Will.

Second, a living trust can include all the provisions needed for avoiding probate or having your assets professionally managed in the event of incapacity, even though you may never use those provisions. In most cases, attorneys do not charge more for a living trust with these provisions than they do for a testamentary trust.

Third, if you later decide to use your living trust to avoid probate or to have someone else manage your assets, all you have to do is transfer your assets because the documentation is already in place. Finally, a Will is a public document, whereas a living trust is not. While that may not be a compelling reason to go with a living trust, it is yet another reason that weighs in favor of the living trust.

So, if you're not concerned about dying or becoming incapacitated, then your estate plan is still likely to include a living trust as a complement to a Will. Still, a living trust in this case is very likely to remain unfunded (i.e., "dry") until you reach the age where death and incapacity loom much greater in your overall perspective on life.

In summary, a large percentage of living trusts are created solely to provide for minor children or others after the death of the grantor, without any intention of funding them during the grantor's lifetime. These so-called "dry trusts" have formed the backbone of estate plans for years and years, and it is only recently that the concept of funding a living trust to avoid probate has come into vogue.