If you are a San Diego resident who is contemplating their estate-planning decisions, one option you may want to consider is establishing a Totten trust for one or more of your heirs.
If you’re unfamiliar with the term “Totten trust,” you may have heard it referenced by other names, e.g., “poor man’s trust” or “payable on death account.” All three terms describe the same thing.
Where does the name come from?
The name stems from a New York state case from 1904, In re Totten, wherein the courts ruled that one person is allowed to use a bank account held in trust for an heir or beneficiary.
So, how do they work?
Basically, Totten trusts are simply regular checking or savings accounts that are taken out in one person’s name (the one funding the account) with the heir only gaining access upon the account holder’s death. This allows the one funding the account to add to or withdraw funds, change beneficiaries and otherwise have unfettered access to the funds without penalty during their lifetime.
Biggest benefit? Skipping probate
If you need one good reason to fund a Totten trust, the fact that your loved ones can immediately access their inheritance without going through probate is probably the most compelling. Also, there is no special charge to set up or manage these accounts like there usually are with other types of trusts.
Make an educated decision for your estate plan
There is no one-size-fits-all estate plan blueprint, but there are several main features that you should include — a simple will, legal and medical powers of attorney, and an advanced life directive. Adding a Totten trust is an easy way to provide for loved ones once you have passed.