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What is a Totten trust?

On Behalf of | Feb 7, 2024 | Trusts |

Totten trusts offer a streamlined approach to transferring specific financial resources upon death. These trusts, known as payable-on-death (POD) accounts, permit account holders to designate beneficiaries who will directly receive the assets held in bank accounts or certificates of deposit.

This approach bypasses the often lengthy and complex probate process, better ensuring beneficiaries gain access to funds without undue delay.

Benefits of using Totten trusts

Totten trusts offer several advantages, including ease of setup and flexibility. Unlike more complex trust arrangements, establishing a Totten trust typically involves a simple designation form provided by a financial institution. This ease of creation and modification allows for dynamic estate planning, accommodating changes in circumstances or beneficiary designations.

Avoiding probate and ensuring privacy

One of the most compelling reasons to incorporate Totten trusts into an estate plan is their ability to bypass the probate process. Probate can be time-consuming and costly, potentially diminishing the value of the estate through legal fees and administrative costs.

Additionally, probate proceedings are public, potentially compromising the privacy of the decedent’s financial affairs. Totten trusts enable a private and efficient transfer of assets, preserving both the estate’s value and the privacy of all parties involved.

Once an account has been established as a Totten trust, it shouldn’t be part of the person’s will. If it’s listed in the will, there’s a chance that issues will creep up after the creator’s death. This is the case if either the Totten trust or the will is updated but the other one isn’t. Conflicting information can lead to lengthy legal issues.

All adults need a comprehensive estate plan. Working with a professional who can offer guidance may benefit them in developing a plan that reflects their wishes. This effort may or may not benefit from the inclusion of a Totten trust.