Why an Unfunded Nebraska Trust Can Be Worse Than No Trust at All

When someone creates a Nebraska trust, there’s often a sense of relief — like the big legal work is done. The document is signed, beneficiaries are named, and it feels like the estate is fully protected.

But here’s where many people get caught off guard: if the trust hasn’t been properly funded, all those protections may fall apart when it matters most.

In fact, an unfunded trust can leave your family in a worse spot than if you hadn’t created one at all.

What Is an Unfunded Trust?

Think of a trust like a box. The legal document is the box itself — but it only holds what you put inside. If you don’t transfer your real estate, bank accounts, or investments into the trust (or align your beneficiary designations properly), the trust doesn’t control those assets.

That means your assets still pass through Nebraska probate, despite your best intentions.

The Hidden Cost of an Unfunded Nebraska Trust

One of the most common issues I see is a false sense of security. A client creates a trust and assumes they’ve avoided probate. But if the assets were never transferred into the trust, that assumption breaks down — and their loved ones still end up in probate court.

Even with Nebraska’s Uniform Probate Code, the probate process is:

• Public

• Time-consuming

• Prone to legal fees

• A potential source of family stress

And if only some assets were funded into the trust, your trustee and executor may be left juggling dual processes — handling probate for one set of assets and trust administration for another. That’s a logistical and emotional burden most families aren’t prepared for.

What About a Nebraska Pour-Over Will?

Yes, a pour-over will is often used as a backup. It can direct assets left outside the trust to eventually transfer into it.

But here’s the key: those assets still go through Nebraska probate first.

So while a pour-over will can catch oversights, it doesn’t replace the need to fund your trust correctly upfront — especially if your goal is to avoid probate entirely.

Missed Legal Protections for Unfunded Assets

Many Nebraskans use trusts not just to avoid probate but for other legal benefits:

• Creditor protection

• Privacy

• Incapacity planning

• Controlled distributions for young or vulnerable beneficiaries

None of those benefits apply if the assets are outside the trust. Without funding, those protections simply don’t exist.

How to Properly Fund a Nebraska Trust

Funding your trust is not automatic. It takes coordination, paperwork, and attention to detail. Here’s what it usually involves:

Real Estate

Work with your attorney to draft and record a new deed transferring ownership to the trust. Nebraska property law requires this step to be clearly documented.

Bank and Investment Accounts

Contact your institutions to retitle the accounts into the name of the trust. Each bank has its own process.

Life Insurance and Retirement Accounts

Update beneficiary designations to align with your trust plan — especially if you’re using a trust as a contingent beneficiary or managing minor beneficiaries through a subtrust.

Personal Property and Vehicles

Depending on value, you may include a schedule of property or work with your attorney to transfer ownership, especially if it impacts Nebraska small estate thresholds.

And don’t forget: this is not a one-time task. When your financial life changes — new home, new bank, major purchase — revisit your trust funding.

What If My Estate Is Small?

Nebraska does offer simplified probate for small estates — such as those under $100,000 in personal property or $50,000 in real estate (as of 2024). But even small estates can benefit from:

• Greater privacy

• Avoidance of court involvement

• Control over how and when funds are distributed

• Streamlined planning for incapacity or disability

If you want those benefits, a funded trust can still be the right move — regardless of estate size.

Why You Shouldn’t DIY Trust Funding

Even clients who are very capable find trust funding tricky. It can involve:

• Legal documents like deeds and affidavits

• Communication with multiple financial institutions

• Navigating Nebraska-specific rules and tax implications

• Avoiding inconsistencies between trust language and account titling

This is one of those moments where working with a Nebraska estate planning attorney is worth every penny. We help ensure the trust works when your family needs it most — and avoid preventable errors that could undo all your planning.

Bottom Line: The Trust Only Works If It’s Funded

Creating a Nebraska trust is a smart first step — but it’s only the beginning. If your assets aren’t properly titled or aligned with your plan, your trust can’t protect you the way it should.

It’s like buying a car and never putting gas in the tank. You won’t get far.

If you’re unsure whether your Nebraska trust is properly funded — or want to make sure your planning holds up when it matters — I’d be happy to help.

Call or text 402-259-0059 or Email zach@zandersonlaw.com.

Frequently Asked Questions

What does it mean to “fund” a trust in Nebraska?

Funding a trust means legally transferring ownership of your assets — like your home, bank accounts, or investment accounts — into the trust’s name, so the trust can manage and distribute them after your death or if you become incapacitated.

What happens if I don’t fund my Nebraska trust?

Any assets not placed in the trust will likely go through Nebraska probate and won’t receive the privacy, control, or legal protections a trust offers. Your estate plan may not work as intended.

Is a pour-over will enough to avoid Nebraska probate?

No. A pour-over will directs assets to the trust after your death, but it still requires those assets to go through probate first. It’s a back-up, not a substitute for proper trust funding.

How do I know if my house is in my Nebraska trust?

Your property deed should list your trust as the owner. If it still lists you personally, the home is not in the trust. An estate planning attorney can help you confirm and record the correct deed.

Can I fund my trust without a lawyer?

In theory, yes — but funding a trust involves legal and financial documents, and mistakes are common. Working with a Nebraska estate planning attorney helps ensure accuracy and compliance with state law.