What is a Totten Trust?
A Totten trust is also known as a payable on death account. It is essentially a bank account for which the person who opens the account names a beneficiary. After the person who opens the accounts dies, the money in the account goes directly to the named beneficiary like a person or Serving Seniors.
Other than that, a Totten trust functions just like a normal bank account. You can add funds, withdraw funds, or close the account at any time. If something happens and you want to change the beneficiary, you are free to do that too. The only real difference with a Totten trust is that you name a beneficiary, and that beneficiary gets the money in the account when you die.
Should You Get a Totten Trust?
There are a few reasons why you might consider getting a Totten trust. The most common, though, is so your family can avoid going through the probate process when you die. Many estates must go through probate after the estate owner has died. In probate, the contents of the estate are counted and inventoried. The estate is then disseminated to the beneficiaries named in a will prepared by the deceased before their death. Probate may not be too big of a deal for smaller estates, as many states have a simplified probate process for estates that are worth less than a certain amount.
Particularly for people with larger estates, probate may be a prolonged process, as it can take months or even years to sort everything out. The process can also prove to be an intrusion of privacy, as everything about the estate will need to be examined by the court and thus become a matter of public history.
A Totten trust can help you to avoid probate. There is already an official beneficiary named, so once the person who creates the bank account dies, the beneficiary can simply go to the bank and collect their money. This doesn’t become an option until the account opener dies. Before that, the beneficiary has no right to any of the money in the account.
One disadvantage of a Totten Trust is that it can only keep cash as an asset. If cash is the only asset you want to leave while avoiding probate, a Totten trust can help. A Totten Trust may also be used when someone has lower amounts of cash.
For more information on gift planning click here or contact Dave Ricks, Director of Donor Relations, 619-487-0734.
