You may have heard the term “Totten Trust” and wondered what, exactly, it means. While it sounds complicated, “Totten Trust” is simply another term for a payable on death (POD) bank account. It’s one option for passing on property outside of the probate process.
How it Works
When you establish a Totten Trust or POD account, you’ll designate one or more beneficiaries for the account. When you pass away, the funds in the account will become the property of whomever you’ve designated beneficiary. In order to claim the funds, your beneficiary will simply have to present your bank with a certified copy of your death certificate, show his or her identification, and fill out any required forms. Once this is done, the account belongs to your beneficiary.
If you’re establishing a Totten Trust and you want to name more than one beneficiary, leaving them unequal shares of the account, you’ll need to specify this on the beneficiary designation form. Unless it’s specified otherwise, beneficiaries generally inherit this type of account in equal shares.
Changing Beneficiaries
Because funds in a Totten Trust pass outside of the probate process, the account is not controlled by your Will. So, if you want to change your account beneficiary, you can’t do so by mentioning it in your Will. Instead, you’ll need to fill out a form directly with your bank, making the change. What happens if you try to change your account beneficiary by simply mentioning it in your Will? Absolutely nothing. The bank will distribute your account based only on the most current beneficiary designation form.
A Totten Trust is just one of a variety of methods for avoiding probate. Your estate planning attorney can help you determine which methods are most effective for you.
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