When assets are transferred to a trust, the assets become the “principal” of the trust or its “corpus”. Upon the death of the creator of the trust, the principal/corpus is controlled by the terms of the trust and the trustee directs how those assets are to be handled after the death of the creator.
As an example, let’s say Ted and Susan are husband and wife and the creators of the Ted & Susan Trust. Let’s also say that Ted and Susan own the following assets:
Blackacre (their residence),
Bank Account 1, and
Bank Account 2.
If all Ted and Susan do is create the Ted & Susan Trust, without transferring ownership of Blackacre, Bank Account 1 and Bank Account 2 to the trust, there will likely have to be a probate upon a death.
Why? Because the trustees of the trust (in this case, assume Ted and Susan are co-trustees) don’t own the property on behalf of the trust.
To properly fund the trust, a deed would have to be recorded transferring ownership of Blackacre from Ted and Susan, husband and wife as joint tenants (or as community property) to Ted and Susan, as Co-Trustees of the Ted & Susan Trust. Once that deed is recorded, Blackacre is controlled by the trust and is no longer required to be the subject of a probate proceeding.
Similarly, once the Ted & Susan Trust has been created, the financial institutions where Bank Account 1 and Bank Account 2 are held, need to be notified of the creation of the trust. The financial institutions will then adjust their records (sometimes by assigning new account numbers) to reflect the fact that the co-trustees own the accounts on behalf of the trust. Once that has been accomplished, those accounts will no longer be required to be the subject of a probate proceeding.