Estate planning options run the gamut from simple wills to complex dynastic trusts. In other words, there are choices for everyone — which can be overwhelming to many.
One option you might want to consider is a Totten trust. Unsure what that entails? Read on to learn more about this estate planning vehicle.
What is a Totten trust?
Totten trusts are trusts in name only. They are also known as payable-on-death accounts. These are regular bank accounts in the name of the account holder. But they also name a beneficiary. The beneficiary receives the amount in the account upon the account holder’s death. There is no need to go through probate, which typically takes a year, but in some circumstances it may take longer.
The name is derived from the 1904 New York civil case, In re Totten, which established that someone may open a bank account for someone else. Later, New Jersey and many other states adopted the practice.
Who controls the account?
The named account holder maintains full control of the account during their lifetime. They are free to add or withdraw funds, change beneficiaries or even close the account. Their very simplicity and ease of making changes are a couple of the top reasons people elect to use Totten trusts as part of their comprehensive estate plans.
Are there any drawbacks to Totten trusts?
As with most legal options, there is a downside. Totten trusts deal only with cash, unlike traditional trusts that can accommodate real estate holdings and other assets and resources. If your estate is large or complex, this probably is not the best choice for you.
The good news is that you don’t have to approach the estate planning process on your own. By learning more about the various options you have, you can select an experienced professional to guide you on your journey.
