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Does your estate include a Totten trust?

| Oct 14, 2021 | Estate Planning

When you open up a financial account, you answer specific questions. One of these has to do with what you want to happen to the account if you pass away. The bank sets up a payable on death designation based on your wishes. This is formally known as a Totten trust. 

The Totten trust is actually a very important part of your estate plan. Setting up the payable on death designation means that the account won’t go through the probate process so that the beneficiary may get the assets sooner. 

Should you include the bank accounts in your estate plan?

If you have a payable on death account, you don’t need to put that account in your will or any other trusts. The terms of the Totten trust govern it. The bank can simply transfer it to the person you named once your death is confirmed. 

Putting an account that has a payable on death designation in your estate plan could mean that you end up with conflicting information if you change the beneficiary on either one. If this occurs, your estate would be on the hook for satisfying both beneficiaries. Having to do this means that your heirs may end up with much less than they expected. It could also hold up being able to close the estate. 

Anyone who’s creating an estate plan should review their financial accounts to ensure that they have the payable on death designation. This is the only way to ensure that you aren’t missing assets and that you don’t have them designated to more than one party.