However, Totten trusts have downsides that can leave an estate exposed, making succession all the more difficult. Before you commit to opening a new account, consult the Law Firm of Kavesh, Minor & Otis, Inc. Our experienced estate planning attorney team has spent decades helping California families protect their legacies from uncertainty. We could help you explore the benefits of a Totten trust while ensuring that your other assets remain safe.
The Totten Trust in California
A Totten trust is a type of revocable living trust. Totten trusts, like other living trusts, can be considered a discrete legal entity. They can receive, manage, and own assets, which are titled in the trust’s own name.
However, Totten trusts are somewhat more limited in scope than conventional living trusts. In most cases, a Totten trust must be established with a bank or other financial institution. Furthermore, it can only hold or possess assets within a designated bank account—it cannot receive re-titled real property or hold a home or motor vehicle for the trustor’s intended heirs.
In many ways, Totten trusts are conceptually quite similar to payable-on-death accounts: after the trustor’s death, the account’s balance is passed on to a named heir, who may claim the funds outside of probate. This process is largely automated, although the estate executor must still inform the bank of the trustor’s death.
Deciding if a Totten Trust Is Right for You
Totten trusts are simple devices, and they may seem like an attractive alternative to more complex living trusts. The advantages of a Totten trust include the following:
- Totten trusts are easy to establish.
- The trustor is afforded exclusive access to the trust funds during their lifetime.
- Upon the trustor’s death, any remaining funds are passed to an heir outside of the normal probate process.
However, convenient as they may be, Totten trusts are not without disadvantages. Since Totten trusts are cash-only accounts, they cannot be used to facilitate the transfer of other estate assets. Additionally, inherited balances are subject to taxation—often at high rates.
Under most circumstances, Totten trusts can be used to complement an existing estate plan, but they should seldom be used to form the basis of one.
Establishing a Totten Trust
Since Totten trusts cannot possess non-cash assets, they are typically much easier to establish than other types of revocable living trusts. Testators are also bound by relatively few requirements: they must be an adult, and they must have a valid Social Security number.
Establishing a Totten trust is otherwise a fairly simple and straightforward process. You should:
Talk to Your Bank
You cannot establish a Totten trust independently. If you believe that a Totten trust could complement your estate plan, talk to your bank about whether it offers Totten trusts or other payable-on-death account arrangements.
Nominate a Beneficiary
Every type of payable-on-death account, including Totten trusts, must include a named beneficiary. A beneficiary can be anyone: a spouse, a child, a family friend, or even a preferred charity.
After the Totten trust is established, the beneficiary can be changed at any time. However, trustors must exercise caution: if they update any element of their estate plan—the Totten trust or another document—they must carefully review their plan to ensure congruity.
Speak to an Attorney
You do not need a lawyer to open a Totten trust. However, the Law Firm of Kavesh, Minor & Otis, Inc. can help you assess your options to keep all of your assets out of probate and safe from potential challenges.