Most people who think of an estate plan automatically turn to the will, but that’s not the only part of an estate plan. Many estate plans also include trusts, which are legal tools that are created to distribute the included assets to the beneficiaries in an effective manner.
One type of trust that’s often used in estate planning is the Totten trust. This is a revocable trust that governs the individual’s financial accounts. This can include checking, savings and investment accounts that are held in financial institutions, such as banks.
What is a Totten trust?
A Totten trust is also known as a payable on death designation. This can be established when opening an account at a financial institution. It specifies who will receive the contents of the account when the account holder passes away. The person who establishes it has the option of changing the beneficiary when they desire.
It’s important to note that a Totten trust doesn’t give the beneficiary access to the account while the account holder is living. The account holder can continue to use the account as they see fit until they die. Once they die, the beneficiary has to bring their photo identification and the account holder’s death certificate to the financial institution so they can access the account.
Because a Totten trust is only one component of a comprehensive estate plan, anyone creating their plan should explore all their options. This may be simpler and less stressful if they work with someone familiar with these matters.