WHY IS IT IMPORTANT TO TRANSFER ASSETS INTO THE TRUST?

The reason is to avoid probate. The correct way you transfer your assets into the trust is by changing title from you as an individual to you as trustee of your trust. It isn't enough to just list assets on a schedule attached to the trust document. Transferring assets from your name to the trust name is referred to as "funding the trust".

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WHO ARE THE PARTIES TO THE TRUST?

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MUST SPECIAL INCOME TAX RETURNS BE FILED?