In the world of estate planning, professional guidance is essential. Crafting a solid estate plan that resonates with your unique needs and objectives is a journey. An estate planning attorney can be your invaluable ally.
A Totten Trust is just one type of trust that might help you plan for your future and ensure your loved ones are taken care of after your death.
Call our law office today to schedule a consultation where we’ll explore all of your estate planning needs.
What is a Totten Trust?
A Totten Trust is a special bank account. It’s created during your lifetime, and it’s in your name. You can deposit money in it throughout your life. As the account holder, the account is held in trust for your named beneficiary, or the person you want to have the money.
At its core, a Totten Trust is a revocable trust, simple and flexible. Often dubbed a “payable-on-death account” (POD account), it’s established by naming a trust beneficiary on a bank or investment account. Throughout the grantor’s lifetime, this trust remains revocable – meaning you can take it back if you change your mind.
Why Do People Use Totten Trusts to Avoid Probate Court?
Avoiding the probate process can save time and money. Probate is a legal process where a court distributes a deceased person’s assets. It can be long and costly. The process is also public, meaning the details of the estate and the beneficiaries are accessible to anyone. This lack of privacy is a concern for many.
By avoiding probate proceedings, the beneficiaries can access the assets quicker. They don’t have to wait for court approval to receive their inheritance. It also means that the details of the estate remain private. Direct transfer of assets through instruments like a Totten Trust ensures a smooth, expedited process, allowing beneficiaries to bypass the bureaucratic hurdles and expenses often associated with probate.
Example: Consider a scenario where Mr. Johnson, a Florida resident, owns significant assets, including savings accounts. He opts for a Totten Trust, naming his daughter as the beneficiary of one of his accounts. Upon his demise, the funds in this specific account will seamlessly transition to his daughter, evading the probate process entirely.
Who Might Need a Totten Trust?
Totten Trusts serve a diverse array of estate planning needs. They work particularly well for individuals seeking simple means to transfer money, ensuring that beneficiaries can access funds promptly upon the grantor’s passing.
However, a Totten Trust isn’t going to be helpful to you if you’re looking for ways to avoid probate for your real estate or real property assets. This trust is simply for monetary assets. However, in Florida, if you want a similar setup but for real estate, consider a Lady Bird Deed.
Example: Mrs. Thompson is an elderly widow with a modest estate. She wishes to leave her savings to her grandson without entangling the funds in legal processes. A Totten Trust becomes a suitable vessel to fulfill this wish, ensuring her grandson receives the funds promptly upon her passing.
The Benefits of a Totten Trust
In Florida, Totten Trusts are advantageous for several reasons. First, they’re simple. You name the person you want to inherit the account, then you can contribute to the account. Second, they are flexible. If you’re worried you might change your mind, you can rest assured that you are able to. And, third, they are convenient for the beneficiary. They keep the beneficiary from needing to go through probate.
The Disadvantages of Totten Trusts
Despite their merits, Totten Trusts have some limitations. They may not perfectly align with more elaborate estate plans. If your estate is complex, you will probably need to develop a more holistic estate plan. Additionally, they expose the assets to potential creditor claims, amongst other vulnerabilities. And, they don’t help you with real estate assets.
Alternatives to a Totten Trust
There are several alternatives to a Totten Trust for managing and transferring assets. One option is a joint ownership or joint tenancy. In this setup, two people own an asset together. When one owner dies, the surviving owner automatically gets the deceased owner’s share.
Another option is a living trust. A living trust holds a person’s assets during their lifetime. After their death, the assets go directly to the beneficiaries. Like a Totten Trust, a living trust avoids probate.
A beneficiary designation on retirement accounts and life insurance policies is also an option. The owner of the account or policy names a beneficiary. When the owner dies, the assets or proceeds go directly to the beneficiary, bypassing probate.
Lastly, a last will is a common tool for asset distribution. It outlines how a person wants their assets distributed after death. However, a will goes through probate, making the process longer and public.
Totten Trusts FAQS
Can I change the beneficiary of a Totten Trust?
Yes, the beneficiary of a Totten Trust can be changed at any time before the grantor’s death. The grantor maintains full control over the trust during their lifetime.
Is a Totten Trust safe from creditors?
No, a Totten Trust is not entirely safe from creditors. During the grantor’s lifetime, the assets in the trust can be claimed by creditors.
Can a Totten Trust have multiple beneficiaries?
A Totten Trust is typically designed to have a single beneficiary. If you want to leave assets to multiple beneficiaries, you might need to consider other estate planning options, such as creating a will or a living trust.
What happens to the funds in a Totten Trust if the beneficiary dies before the grantor?
If the beneficiary of a Totten Trust dies before the grantor, the funds in the trust typically revert back to the grantor’s estate. It’s essential to update the beneficiary designation to ensure that the funds are distributed according to the grantor’s wishes upon their death.
What type of assets can be placed in a Totten Trust?
A Totten Trust is usually associated with bank accounts or investment accounts. It is not suitable for real estate or other types of physical assets. The trust is essentially a payable-on-death designation on a financial account, allowing the funds in the account to be transferred directly to the beneficiary upon the grantor’s death.