Wills are the most widely known estate planning tools for passing on assets. They’re what the majority of people would probably think of first if you asked them what you should include in your estate plan. Yet they are just one of a variety of estate planning tools available to facilitate the transfer of your possessions to your loved ones or others you choose.
Totten trusts are another means of passing on assets. They can’t replace a will. However, they have several advantages that suit particular situations.
The pros and cons
Totten trusts originated in New York, taking their name from a 1904 court case. They are sometimes called payable-on-death (POD) accounts and are best thought of as a bank account with a named beneficiary.
Like a traditional bank account, the person opening it has full control over it. They can add or withdraw money, and they can close it if they wish. The difference is that when they die, the money will be transferred to their beneficiary without the need to codify that elsewhere, as is necessary for traditional bank accounts. The account won’t go through probate, allowing it to reach the hands of the named beneficiary much quicker.
The big disadvantage is that creditors with valid claims may be able to claim money from the account, unlike some other trusts. Another disadvantage is that, unlike other trusts, Totten trusts can only handle money — not real estate or anything else.
It can be tough to work out which tools best suit your estate planning needs. Experienced legal guidance can help you learn more about the options and choose the ones that are best suited to your unique situation.