Do You Need to Fund A Trust With Money Before the Trust is Legal in New Jersey?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Trust Attorney

So you have just created a trust, signed some papers, and you are ready to go with it.  Now what? Must you fund this trust?  What does funding a trust mean?

To fund a trust means to change the ownership of your property to the trustee of the trust, or to change the beneficiary of investments, retirement plans or life insurance to the name of trust owner.  Subject to the type of trust you created, the means and method of funding the trust depends upon why you set up the trust and what you wanted to accomplish.

A revocable living trust is one where you decide who benefits from your assets when you are alive or become disabled, or die.  It eliminates the hassle of probate because your family knows what they are getting pre-death.  The assets of the trust must be retitled into the trust in order for your trust property to be administered according to your wishes, particularly if you are disabled.  Note though that assets in a revocable trust are still available to creditors, and are still counted as resources for purposes of Medicaid and death taxes.

Another common trust people tend to execute is an irrevocable trust.  This type of trust protects assets from creditors.  It is critical that the assets of the trust that you wish to keep safe from creditors and don’t want counted for Medicaid purposes are placed in to this type of trust.  The timing of when the assets are transferred is critical with Medicaid.  If you are an avid reader of this site or watch my videos, you know Medicaid looks back 60 months, or 5 years, to review all of the transfers you have made, invalidating those transfers made within that time period when determining eligibility.  Therefore, with each transfer to a trust you start another 5 year waiting period before Medicaid does not count the transfer.

There are other available options to transfer your estate when you die. You can transfer your remaining property via your last will to a trust if you so choose.  But you may not incur the benefits of asset protection or give your executor the opportunity to control the assets.  This is huge if you want a partial say on how your money is distributed after you die. Moreover, if the money is going to a spouse looking to get on Medicaid, you just jeopardized their eligibility (assuming the IRA is not annuitized).

These are just some of the considerations you must evaluate when creating an estate plan.  Always be aware of how you own your property. The consequences do matter.

To discuss your NJ Medicaid and Estate Planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing consultations if you are unable to come to our office.