Legal Insurance
What Is a Totten Trust?
Totten trusts are a type of bank account that allow assets to be transferred to a beneficiary after the depositor’s death. The depositor acts as a trustee for the beneficiary, who is named when the account is opened. Totten trusts are also called tentative trusts or payable-on-death bank accounts.
How does a Totten trust work?
Opening a Totten trust is as easy as going to the bank and filling out some paperwork. The most important information you’ll provide for a Totten trust account is the name of the account’s beneficiary. This is who you want your assets or funds to go to. They can be family, a close friend, or an organization.
The beneficiary won’t have access to the funds while you’re still alive. As the trustee, you retain complete control over a Totten trust account. This means the trust administration, including moving money in and out of it, changing the beneficiary, or closing the account, is up to you, the account holder.
Can a Totten trust be revoked?
There are three ways a Totten trust can be revoked:
- You (the depositor and account owner) remove all assets from the account.
- The intended named beneficiary dies before collecting the trust’s assets.
- You give explicit written instruction to close the account during your lifetime.
In general, Totten trusts are easier to adjust or close than other types of trusts. Because they’re managed entirely by a bank, all you need to do is submit the right forms.
What are the benefits of Totten trusts?
You might want to use a Totten trust if you want asset protection and you’re trying to avoid probate. This is the process by which wills are validated and assets are distributed. On average, probate lasts 12 months. However, complications with the estate can draw probate out and result in more court fees.
Totten trusts typically circumvent probate. Once you’ve passed away, the assets are transferred directly to the beneficiary. The asset distribution is handled by the bank, which means there’s no need for validation of the account.
Overall, Totten trusts are an easy way to manage your estate. Once you’ve provided your bank with the paperwork, they’ll handle the rest when the time comes. You can also easily adjust the trust by simply informing your bank of the changes you’d like to make.
Should you set up a Totten trust?
Totten trusts are a quick and easy way to make sure your assets go to your beneficiaries. The best way to know if a Totten trust is right for you is to speak with an estate planning attorney for legal advice. The attorney can help you decide how to best distribute your assets.