Totten trust is a type of trust that allows a grantor place funds into an account for a named beneficiary to get it after his or her death. A named grantee benefit from the Totten trust. Typically, Totten trust don’t go through probate process before being implemented. The reason is because the bank account already exist during the lifetime of the grantor, also the account as a named beneficiary. Totten trusts are revocable trust meaning at any at point in time, the grantor can collect the funds allocated to a beneficiary, remove or add another grantee or just close the account. Also known as payable on death account, the beneficiary of the account claims the account after the passing away of the account holder.
Totten trust avoid probate.
Totten trust is popular and highly recommended by estate attorney because they allow easy transfer of money at the death of the grantor without any probate proceedings. To obtain this trust, or open the payable on death account, you need to fill out account opening form and other proper forms provided by the bank then submit it. The named heir would also be included in the account. The trust with then be kept and documented, making it easier to be implemented when the time is right. The beneficiary at the time of formation of the trust would not have any say over the account or be liable to any consequences while you are still alive. That means the receiver doesn’t have right to the account.
Who has access to the Totten Trust?
As mentioned earlier, the named receiver does not have any legal right to the funds in the Totten trust. Although, he may be aware of creation of such trust and also that he is a named beneficiary of the trust. However, asides that the beneficiary cannot touch the money while the grantor is alive, the money is not considered to be an asset of the beneficiary should he get sued by creditors, runs in bankruptcy, or gets divorced. As the grantor and the initiator of the trust, you can close the account containing the funds, withdraw part or all of the funds, or name another beneficiary in the trust. The payable on death account can be sometimes be treated as any account which may be accessible by creditors.
The only time the account is accessible to or the fund released is at the death of the grantor. The trust beneficiary would need to go to the bank with evidence of death of the grantor, and a proof of ID.
Advantage of Totten trust.
Totten trust is one of the best estate plans you can put in place for family, children and loved ones. The trust has lots of advantages over other form of living trust.
First, it is easy to create. The trust can be created at your convenience, as it does not require lots of documents or legal formalities. All you just need to do is go to a bank, fill out properly the payable on death forms and then submit back to them. The process is smooth and easy with fewer formalities.
Secondly, the trust can be implemented with ease. The named beneficiary just need to go the bank with identity card and other evidences required to implement the transfer of the funds.
The trust does not need to go through probate to be implemented. The funds in the payable on death account would be transferred to the beneficiary once it’s confirmed that the grantor is death. The trust is to basically cater for the named beneficiary of the trust once the trust maker is dead. Thus, probate is not required, because the trust was created during the grantor lifetime and it held all the funds he wishes to give to named receiver. A named beneficiary in the case could be children, family or a charity foundation.
Cons associated with Totten trust.
Totten trust is all good, however, some certain aspect of it can be considered as a disadvantage. Because, the account holding the trust can be treated as any other bank account, the trust cannot be protected from creditor who may want to get part of the fund to settle a debt.
In any case, this trust is a good estate plan to cater for your loved ones when you are no longer with them.