Creating an estate plan is one of the most important things an adult can do. If you’re working on getting yours together, there are several matters to consider. For example, while most people know that they can pass down assets via a will and trusts, they may not realize how varied trusts are.
One type of trust that’s often a part of a comprehensive estate plan is a Totten trust, which governs what happens to financial accounts, including checking and savings. This type of revocable trust is also known as a “payable on death” account and is set up at a financial institution.
Avoiding probate
One of the primary benefits of a Totten trust is its ability to avoid probate, the legal process through which a deceased person’s estate is managed and distributed. Probate can be time-consuming and costly, so a Totten trust can streamline the inheritance process to make it faster and less burdensome for beneficiaries.
Flexibility and control
A Totten trust offers an appealing option for individuals who value flexibility and control over their assets. Since the account remains under the depositor’s control during their lifetime, it allows for changes as circumstances evolve. Beneficiaries can be added or changed, and the amount designated for inheritance can be adjusted by simply managing the account funds.
Complementing a will or trust
A Totten trust can be an effective tool for passing on certain assets, but it’s most effective when used in conjunction with a will or other trust arrangements. This is because a Totten trust only covers the specific assets held in an account and doesn’t address the distribution of other personal property, real estate or the designation of guardians for minor children.