Creating an estate plan is an important task for any adult, but it’s one that can be challenging because of everything that has to be considered. Some people who are just starting on this process may not think that they need to entertain the idea of having a trust, but there is one type of trust that can be critically important to an estate plan.
The Totten trust is a revocable trust, which means it can be changed as you see fit. This is set up at your financial institution and governs what happens to your accounts when you pass away. Each account can have a different Totten trust. When you go to the bank, you may hear them call it a payable on death designation.
Why is a Totten trust important?
A Totten trust is important because it allows your designee the ability to access the funds in the account without having to go through probate. Instead, they can bring your death certificate and their photo identification to the bank and access the account. This can bridge the gap between your death and when probate closes.
Having someone named as designee doesn’t provide them with any access to the account before your death. You retain full use of the account and complete privacy. It’s only after your death that they are given access.
If you’re using a Totten trust for your financial accounts, it’s critical that you leave those assets out of your formal estate plan. This is necessary to ensure that there aren’t any discrepancies in who receives the account. You should still have your other assets outlined and designated in the estate plan through your will or trusts. Working with someone who understands your situation and can help you determine how to handle everything may be beneficial.