A living trust is considered to be a separate tax entity, originally created for people who were still living, but could no longer handle their financial affairs.
The trust document would identify the participants:
–the Grantor – the person whose affairs needed to be handled
–the Trustee – the person or business that would be handling said affairs, and
–the Beneficiaries – the people or causes that would receive any remaining assets in the event of the Grantor's passing.
In addition, the trust document would describe all the instructions for handling their financial affairs, providing certain powers of administration and restricting certain actions of the appointed Trustee. You can have a peek at this website to know more about family trusts.
In order for these financial affairs to be able to be managed by the Trustee, the assets would be "transferred" into the trust's name. In plain English, this meant that all the Grantor's assets were retitled into the name and ownership of the living trust.
Over time, the benefit of creating a living trust while the Grantor was still competent was popularized. The legal industry realized that a Grantor could decide ahead of time how and when and where their assets would be managed and distributed to the next generation while reducing or eliminating estate taxes in the process.
As a result, creating a living trust became all the rage. Some attorneys even created living trust "mills", turning out general living trust documents at very low prices.
However, these living trusts were created with inherent implementation issues because there was no follow through provided to the Grantors or Trustees by the trust "mill", often making the trust essentially useless.
During the process of solid estate and trust planning, the Grantor's assets are analyzed and reviewed in detail for their proper positioning in the trust document's instructions. Often, an actual assets listing is created to identify which assets should be retitled into the name and ownership of the trust.