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Once assets are put into the trust they belong to the trust itself, not the trustee, and remain subject to the rules and instructions of the trust contract. Most basically, a trust is a right in property, which is held in a fiduciary relationship by one party for the benefit of another. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust.
In order to establish a basic living trust, the Grantor should prepare and execute a document called a declaration of trust, which is similar to a Last Will and Testament. The declaration of trust sets forth the terms and conditions of the living trust. In the document, the Grantor names himself or herself as trustee, and transfers assets to that trust . Because the Grantor is named as the trustee, he or she maintains full control over the assets.
After creating the living trust, the grantor should transfer personal assets into it. This is referred to as funding the trust. In order to transfer real estate into the living trust, a real property deed naming the living trust as grantee should be executed and recorded. Bank accounts, retirement accounts and life insurance policies can be also be transferred to the trust. A warranty deed or quit claim deed is commonly used to transfer real property to the trust.
Once a living trust is created the grantor, as trustee of the living trust, manages trust assets for his or her personal benefit as well as for the benefit of the beneficiaries. Even though the living trust is also managed for the benefit of beneficiaries, a trust beneficiary receives nothing until after the grantor’s death. Upon the grantor’s death, the successor trustee becomes acting trustee and passes living trust property to the beneficiaries without need of probate.
Assets not transferred to the living trust are subject to probate upon the grantor's death . So even if a person has a living trust, he should have a will, called a pour-over will. Pour-over Will is used to transfer or "pour" all of the grantor's remaining property into the living trust upon his or her death. A Pour-over Will is usually executed simultaneously with a living trust.