When Saying So Isn't Enough

The importance of funding your trust.

A trust agreement is essentially a contract containing terms for the management and distribution of assets transferred to the trust. A declaration of trust, on the other hand, is a list of assets transferred or to be transferred to the trust. Even if a declaration of trust is signed by the parties to a trust agreement and claims to transfer accounts, securities, and other assets to that trust, it is insufficient to do so.

The limitations of a declaration of trust were confirmed in a recent unpublished case from the Michigan Court of Appeals, Schaddelee v DeLeon. The Schaddelee decision affirmed the ruling of the lower court, which found that a declaration of trust is not a contract or agreement. It is merely a declaration or statement without power to move assets or to govern their disposition at death. In contrast, it is a trust agreement that governs the ultimate disposition of assets, and a trust agreement must be funded by either retitling an asset in the name of the trust or making the trust the beneficiary of an asset via a beneficiary designation form.

If your estate plan includes a declaration of trust and you have not taken separate steps to fund your trust, we invite you to speak to one of the estate planning attorneys at Wright Beamer. You can reach us at 248.477.6300.