Many adults have financial accounts that they want to pass down to their loved ones. You may assume that this will be complicated, but it isn’t. Most people get these accounts into the hands of their loved ones through the use of a Totten trust.
While it’s called a trust, a Totten trust is actually very easy to set up. Some people do this without knowing it was done because a Totten trust is just the formal name for the payable-on-death designation that you set up when you opened a bank, savings, or another financial account.
How does a Totten trust work?
A Totten trust gives the financial institution your wish for what will happen with the associated account when you die. The person will have to produce your death certificate and follow the institution’s set procedure to access the funds in the account.
The good thing about a Totten trust is doesn’t have to go through the probate process. This makes it much easier for your loved one to get access to the account. It also protects some privacy since there’s no public court record about it. The Totten trust doesn’t allow the person to access the accounts before you die, so they won’t be able to touch your money until you die.
The financial accounts that have a Totten trust shouldn’t be included anywhere else in the estate plan. Having them in the estate plan can cause problems if you have to change the beneficiary.
Adults should ensure they have everything covered in their estate plan. This means thinking beyond just writing out a will. Working with someone who’s familiar with your wishes and can get the plan set up in a legal way is beneficial.