A friend of mine created a living trust at a law office a few years ago. He felt proud holding the thick binder, thinking his children would no longer have to struggle.

However, while flipping through that binder recently, I asked him one question. Did you change the house deed to the name of the trust? The answer was a moment of silence.

This is more common than you might think. In the industry, this is referred to as an unfunded trust, meaning it's an empty trust. It's like buying a safe but leaving the valuables in the living room drawer.

Just signing the trust documents doesn't automatically transfer assets into it. The house must be re-titled in the county with a new deed to be owned by the trust, and bank accounts or investment accounts also need to have their titles changed separately.

So what happens if you pass away without changing the title of the house? Let's go through it step by step based on Illinois law.

First, the house goes into probate, which is the court process for validating a will. The main reason for creating a trust is to avoid probate, yet the most valuable asset ends up going through that process.

Typically, a pour-over will is created alongside the trust. This will states that any assets remaining outside the trust should be transferred into it, but the problem is that those assets must go through probate before they can reach the trust.

You might ask if there's a way to bypass this through a simplified process. The Illinois Small Estate Affidavit limit was raised from $100,000 to $150,000 with Public Act 104-0346, effective August 15, 2025.

However, this affidavit cannot be used if there is any real estate involved. No matter how high the limit is, if a house is included, it doesn't apply.

Entering probate takes time. Once a notice to creditors is published, the claim period is at least six months from the date of the first publication, and if no notice is published, claims can be made up to two years after death.

During this time, attorney fees and court costs accumulate, and property management fees and taxes continue to accrue. Additionally, probate records are public documents, so anyone can see who inherits what.

Second, problems can arise while you are still alive. For instance, if you suffer a stroke or dementia and can no longer make decisions.

If the house is in the trust, the successor trustee can manage or sell it immediately. However, if it remains in your name, the trustee has no authority to handle the house.

If there is no power of attorney that includes real estate, you may have to go through a court guardianship process. Imagine needing to sell the house to cover nursing home costs but having to wait for a court date; just thinking about it raises my blood pressure.

Third, if a couple owns the house as joint tenants, when the first spouse passes away, it automatically transfers to the surviving spouse. This gives everyone peace of mind, but the real issue arises when the surviving spouse passes away.

If the deed hasn't been changed by then, the house will ultimately go to probate. This doesn't solve the problem; it merely postpones it to the next round.

So is transferring the title difficult? Not necessarily. Typically, an attorney will draft a new deed (often a quitclaim or warranty deed) in the name of the trust and record it with the county. In Cook County, the County Clerk's office handles the recording.

If you are transferring it to your revocable trust without compensation, the transfer tax exemption usually applies. However, whether a report needs to be filed or what local documents are required can vary by area, so it's best to check before recording.

Even if there is a mortgage, it's usually fine. The federal Garn-St Germain Act prevents lenders from demanding full repayment of the loan solely because of a transfer to a revocable trust where the borrower continues to reside and remains the beneficiary.

Make sure to check whether property tax exemptions like homestead remain in effect after the transfer. The county assessor may require documentation to confirm that the resident is the beneficiary of a trust-owned home.

Taking care of the house isn't the end of it. You should also change bank accounts to the trust name or designate POD beneficiaries, and keep the beneficiary designations for retirement accounts up to date.

In Illinois, there is also a method called TODI (Transfer on Death Instrument). This is a deed that allows the house to transfer to a designated person upon death, but how it interacts with the trust should be discussed with a professional.

Honestly, I have some dissatisfaction with law offices regarding this matter. They often create the documents nicely but leave the funding as the client's responsibility.

So when creating a trust, ask upfront. Is the cost of drafting and recording the deed included? This one question can save you thousands of dollars and months later on.

If you already have a trust, today's task is simple. Search your home address on the county recording site to see who the grantee is on the last deed.

If your name is the only one listed, the safe door is still open. However, inheritance and tax issues can vary based on family composition and asset situation, so be sure to consult an Illinois estate attorney before making decisions.

I would pull out that binder again and check the funding first. A trust only serves its purpose from the day the house is included, not the day you signed it.