Most adults have a deep-seated need to care for their loved ones. One way that you can do this after you pass away is to establish an estate plan. This is a set of legal documents that relay your wishes about what type of care you desire if you’re incapacitated and how you want your assets to be divided.
While you might think that you need to put all your assets in the estate plan, there are some that don’t belong there. Some assets are governed by a Totten trust, which is informally known as the payable on death designation. This is associated with various accounts held at financial institutions, including checking and savings accounts.
How do you establish a Totten trust?
Establishing a Totten trust is simple. When you start an account at a bank, you will designate a person to receive the balance of the account if something happens to you. The person doesn’t have any rights to the funds before your death, so you don’t have to worry about it being emptied while you’re still living.
If you have a payable on death designation set up for the account, you shouldn’t include it in the estate plan. Having it in the estate plans means that you must ensure it matches the Totten trust designation or you risk your estate having to cover the value of the account for the second heir that’s named to it.
Your estate plan isn’t limited to just one document that spells everything out. Instead, it’s a group of documents that work together so that your final wishes are known. Ensuring that you have everything set up so it reflects your wishes is imperative because you won’t be there to answer questions or fix things. Working closely with a person who understands these matters is important so you can get this done as quickly and easily as possible.