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What is a Totten trust and how does it work with an estate plan?

On Behalf of | Jan 15, 2025 | Wills And Trusts |

A lot of thought goes into an estate plan, so it’s critical that you carefully consider all the options you have to get your assets to your loved ones when you pass away. For some people, hearing about trusts is mystifying because they believe all trusts are only for people who have considerable assets, but that’s not necessarily the case. 

Some people have a trust already established and don’t even realize it. If you have a payable-on-death account, which is common for financial accounts, you established a Totten trust. This type of trust is revocable because you can change the beneficiary whenever you want.  

What does a Totten trust do?

A Totten trust allows the financial institution holding your account to give the contents of the account to the person you name. In order to receive the funds, the person has to present your death certificate and acceptable photo identification. 

The individual you name doesn’t have any access to the account prior to your death. This enables you to use it freely as you see fit. 

How does a Totten trust impact an estate plan?

Once you establish a Totten trust for an account, you keep that account out of your estate plan. This ensures that the beneficiary you named on the account can access the funds without the delay of having to go through a probate battle. A probate battle is possible if the information in the estate plan doesn’t match the information on the Totten trust. 

Building a comprehensive estate plan enables you to make your wishes known. Working with someone familiar with your situation may be beneficial so you can get everything set up in a legally enforceable manner.