If you’re reading this post, you likely have a few people and/or organizations you want to include in your estate plan.
Fortunately, there are a few options to consider when planning to leave something behind for these people. Totten trusts, also known as payable-on-death accounts (POD), provide a relatively simple way to meet your goals.
What is a Totten trust?
It is a simple bank account in which the depositor arranges for whatever remains in the account upon their death to pass to a named beneficiary. A New York court recognized the first Totten trust in the early 1900s.
What are the benefits?
Although Totten trusts are not typically appropriate for all your beneficiaries, they can serve as a catchall for those you cannot address in your will or other documents. Five benefits of Totten trusts include the following:
- They do not pose gift taxes.
- They are usually easy to create.
- They do not go through probate
- You can use the account until you die or close it.
- You can revoke the trust at any time during your life.
There are few drawbacks to Totten trusts. They include the following:
- They only work for cash.
- They may be heavily taxed.
It is not difficult to create this type of account, but it is wise to seek experienced legal guidance when adding or removing components of your estate plan or making any modifications to it. This can help you learn more about all of your options and help to ensure that your estate decisions are financially and legally sound and meet your goals.