Totten trusts are valuable in estate planning

On Behalf of | Feb 26, 2024 | Estate Planning

Totten trusts, also known as payable-on-death accounts, are an effective estate planning tool that allows individuals to pass on assets without the complexities of probate. By incorporating Totten trusts into a comprehensive estate plan, individuals can ensure a smoother transition of their assets to beneficiaries.

Totten trusts provide clarity and reduce potential conflicts after their passing. This tool is particularly useful for bank and investment accounts.

Simplicity and ease of creation

One of the primary advantages of a Totten trust is its simplicity. To create a Totten trust, an individual, the grantor, must designate a beneficiary on a bank or investment account. This designation instructs the financial institution to transfer the assets directly to the named beneficiary upon the grantor’s death.

Avoiding probate

Avoiding probate is a significant benefit of incorporating Totten trusts into an estate plan. Probate is a costly public process that involves distributing a decedent’s assets under court supervision. By allowing assets to pass directly to beneficiaries, Totten trusts bypass this process for a quicker and more private transfer of assets.

Flexibility and control

Since the grantor retains ownership of the account, they can change the beneficiary, withdraw funds or close the account at any time without the beneficiary’s consent. This level of control ensures that the grantor can adjust their estate plan as circumstances change.

Part of a broader estate planning strategy

While Totten trusts provide many advantages, they should be considered part of a broader estate planning strategy. It is important to consider how Totten trusts fit with other estate planning tools, such as wills and trusts. Seeking guidance about the estate planning strategy is beneficial.