Is a Totten trust part of your estate plan?
There are many parts of estate plans, especially for people who have considerable assets. Some people may have a part of their estate plan already set without even knowing it. When you open a financial account, you might fill out a form that tells the institution who is to manage the account should you pass away. This form is known informally as a payable on death designation, but the formal name is a Totten trust.
A Totten trust allows a financial institution to pass on your checking, saving, or investment accounts. This is a revocable trust that you can change at any time you desire. Because it’s revocable and you have access to the account’s contents, there isn’t any creditor protection.
2 important facts about Totten trusts
The first thing to remember about Totten trusts is that you shouldn’t include the associated account in the will or any other trusts.
The second thing to remember is that the person you name doesn’t have any access to the account until you pass away. They can’t go to take money out of it or anything similar because you retain complete control of the account until you die.
Anyone who’s setting up an estate plan should think carefully about how they want to handle each asset. While some might be able to be passed down in a will, it’s often best to use specific trusts so that your loved ones don’t have to go through the probate process. Learn about the options you have so you can determine what’s best for your needs.