What is a Totten Trust ?
Probate is the often times dragged out court process of verifying that the will purported to have been made and signed by the deceased is in fact that. If you have a will or intend to make one sometime in the future, you should expect that it be filed with the Surrogate’s Court at your death and any family members entitled to your estate (if you had died without a will) to be notified of your passing. In addition to being notified of your death, they must receive a copy of your will.
Although you may have left your wife or son out of your will- for reasons best known to you- expect them to be notified and given the opportunity to challenge the will. If you are married, then special New York State rules apply when disinheriting a spouse.
When your executor locates your original will and files the document with the court, the beneficiaries, along with disinherited family members, must all be located and listed in court papers. A missing heir or a beneficiary can tie up the estate for months, and sometimes years. As you can already assume, this may become a long and complicated process. But is such a process necessary when you have a simple bank account? The term “Totten Trust” should come to mind when it comes to a bank account. A less esoteric and legalese name for a Totten Trust is simply a payable-on-death (POD) bank account. As the name suggests, upon death, the account is transferred over to your named beneficiary. The beneficiary can be your son, or your doorman, that decision is in your sole discretion.
While visiting a bank branch can be out of reach for some, for others, a POD account is a great way to avoid probate. A POD or a Totten trust is a convenient way to transfer your savings or checking account to a selected beneficiary without the involvement of the court. Inquire with your bank regarding what form needs to be filled out in order to set up this type of account. Unlike a will, that should be kept in the privacy of your home or your lawyer’s office, the forms associated with a POD account must all be filed with the bank.
What are the beneficiary’s rights to the Totten Trust?
In short, none. While you are alive, your noted beneficiary has no claim to the funds in the POD account – they cannot withdraw any money or have any access to it. The POD account is not counted as an asset of the beneficiary, there can be no claim to the money through a divorce, or lawsuit. Only upon your death, legal title passes and vests in the beneficiary. It’s important to note that you can change the beneficiary at any time during your life, and there is no restriction when it comes to your use of the account’s funds.
Is a Totten Trust worth it?
To make sure the money in your bank account passes to a person of your choice at death, you don’t need to buy anything such as a last will and testament or a fancy trust instrument. All you have to do is take a few minutes to visit a branch and tell a customer service representative that you would like to set up a payable-on-death bank account. Seriously, that’s it. The use of a POD account is an absolute time and money saver. At your death, all the beneficiary has to do is provide a certified copy of your death certificate and their identification to withdraw or transfer the funds out of the account. Banks have been forming Totten Trusts for a long time so this would not be a new process for them. If a Totten Trust a/k/a POD account sounds good in theory but you are too busy to visit a branch or need a more elaborate estate planning scheme to embody all your assets, we offer a package of crucial documents to set your estate plan up including a last will and testament, a power of attorney, and a healthcare proxy. Combining your Totten Trust with a complete estate planning package can make for a solid foundation.To learn more about our estate planning package, review it here. As soon as you are finished reading this post, email or call us to discuss the best plan for your needs.