The Disadvantages of Totten Trusts
Totten trusts, unlike other types of revocable living trusts, only accept cash deposits. So, if your estate includes valuable non-cash assets, simply establishing a Totten trust will do little to keep your loved ones out of probate.
If your estate includes valuable personal possessions, investment portfolios, or real property—a family home, a business, or a rental unit—you may wish to consider establishing a standard revocable living trust.
A revocable living trust, like a Totten trust, lets you transfer assets in and out of the trust at will. You can also cancel a revocable living trust at any point, without penalty. However, revocable living trusts are far more flexible than Totten trusts. Not only can you deposit non-cash assets, you can make inheritances conditional. You might, for instance, specify that your children’s trust be used only for higher education, or stipulate that they not begin receiving disbursements until they have reached a certain age.
Since Totten trusts disburse immediately upon your death, they lack long-term flexibility and deprive you of the ability to control how your assets are used after you die.
How an Estate Planning Attorney Can Help
Totten trusts are advantageous, especially for people who have significant cash assets or cash-heavy estates. Your estate plan could well benefit from the inclusion of a Totten trust. However, a Totten trust should be considered part of a bigger, better, and more comprehensive estate plan. This type of trust can help you easily pass money to an heir, but it will not protect the rest of your hard-earned assets.
An estate planning attorney can help review your assets. They will custom-build a plan intended to keep your family safe from probate while minimizing their tax obligations and giving you maximum control of how your estate assets will be used after you die. In many cases, your lawyer can leverage your estate plan to save you money while you are still alive.
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