Additions to Trust, Funding, Lapse

A trust is really only efficacious to the extent assets are titled and owned by the trust. To transfer assets to a trust, there must be a formal conveyance to the trust or trustee of the trust. Certain assets will have to be transferred and re-titled in different ways. With real estate, for instance, there must be a deed transferring title to the trust. Some do not like transferring everything over to a trust during their lifetime because of administrative complications and potential inconvenience.
As a result, a common technicque is to execute non-probate transfers (e.g., transfer on death, payable on death) or a last will and testament (a pour-over will) in which the trust entity receives certain assets upon the owner’s death. This is especially common with life insurance to where many times a trust will be the beneficiary for a death benefit. This approach ensures that the assets are ultimately transferred to the trust, but maintains personal ownership during the owner’s lifetime.
This type of planning technique is expressly authorized by Section 456.021, RSMo. What happens if the trust is a beneficiary on a non-probate transfer (or something similar) and the trust is subsequently revoked or terminated? In short, the transfer would likely no longer be good and the law would treat it as a lapse (i.e., failed gift/transfer). In re Estate of Corbin, 66 S.W.3d 84, 90-91 (Mo. Ct. App. 2001); Section 456.021(2).