One important aspect of estate planning is avoiding probate so that you get to decide where the assets you earned during your life actually go rather than letting a court make those decisions. If your primary concern is passing on cash to your family so they aren’t financially burdened, one of the simplest methods is to use a payable on death account—which is also known as a Totten trust.
How a Totten Trust Works
The Totten trust takes its name from an early 1900s court decision that allowed accounts to be created with a different beneficiary in mind other than the actual account holder. Although it’s called a “trust,” this is essentially just a normal bank account with a named beneficiary.
A bank account can either be set up from scratch specifically as a Totten trust, or you can convert an existing checking account. Unlike other trust types that have a third-party trustee overseeing assets, you have complete control over all the funds in the payable on death account. The beneficiary has no access at all while you are alive, and at any time you can:
- Add funds
- Withdraw funds
- Change beneficiaries
- Entirely close the account
Once you pass away, all the funds are directly available for the beneficiary. This would typically be a direct family member but could be anyone you want to name.
The benefit to a Totten trust is that your family has funds available very quickly and isn’t left in limbo while the probate process catalogs your assets and decides what to do with your estate.
Why You Should Talk to a Lawyer About a Totten Trust
There is one important drawback to keep in mind when setting up a Totten trust. This type of account can only include cash. It can’t hold other types of assets that would usually be put into a trust. That means payable on death accounts won’t keep any of your property or heirlooms out of the probate process. If you own other assets like businesses or real estate, then this type of trust should just be one part of a more comprehensive estate plan.
Are you wondering how to set up a Totten trust and need to talk over other potential asset protection and estate planning options? Get in touch with the Alatsas Law Firm today and let us know how we can help your family prepare for the future.