Probating an estate can drag out for a year or more, depending on its complexity. Meanwhile, your heirs may be struggling financially until the assets are disbursed.
There is a way to avoid some of the wait, however. It involves establishing a Totten trust. Read more below to see if this handy estate planning vehicle will solve some problems.
What it is and does
Totten trusts are not actually trusts in the usual sense. The name comes from an early 20th-century case out of New York, In re Totten, which established the legality of opening a bank account for another person.
Technically, these are simply another name for payable-on-death bank accounts. As such, they deal only with cash assets. They are particularly useful for decedents who in life wanted to bequeath money to nontraditional heirs.
Who might be named in a Totten trust?
Do you have a special friend who could benefit from an infusion of cash after your death? Or maybe you want to privately honor someone important in your life, like a trusted employee, a child from a former spouse or one born out of wedlock.
Other benefits of Totten trusts
These designations are not part of probate, giving them a layer of privacy they would not otherwise have. The person establishing the account retains control of the funds until they pass away, and they can add or withdraw funds at will during their lifetime.
Should the relationship with the beneficiary falter, the account owner is free to delete the person from the account, appoint another instead or close the account.
Is a Totten trust for you?
Not everyone will need a Totten trust, but for those who may, this is just one option in an array of estate planning choices you can make.