Creating an estate plan is a major undertaking, but it’s vitally important that it’s done properly. One goal you likely have for your estate plan is to pass down assets to your beneficiaries.
Deciding who you want to take control of your bank account when you pass away is a major decision. This is one of the assets that’s simple to handle because you can name the beneficiary in the payable-on-death designation form. This is known as a Totten Trust.
How does the Totten Trust work?
The Totten Trust is a simple form you fill out at the financial institution. This lets the bank know who they can pass the contents of the bank account to when you pass away. In order to receive what’s in the account, they must have a copy of your death certificate and turn it into the bank.
A Totten Trust doesn’t give the beneficiary any rights to the account before your death. This ensures that you’re able to use the money in the account freely. While they have to wait for your death certificate to receive the contents of the account, this is a way that you can care for them after you’re gone.
Another important consideration if you’re creating an estate plan is that you shouldn’t put the accounts covered by the Totten Trust in your estate plan. This is because there’s a risk of changing the beneficiary in one of these and not the other. If the estate plan and the Totten Trust don’t match, it can cause trouble for the estate after you pass away.