When creating your estate plan, you’re probably looking for ways to transfer assets to your loved ones without going through probate and with as little hassle as possible. If you speak with a bank representative, they may recommend that you set up a “Totten trust.” So, what exactly is a Totten trust? What Is the Difference Between a Totten Trust and a Pod? Also, “How does Totten Trust Work in California and Florida”. In this guide, we’ll answer these questions and help you determine whether this estate planning tool is right for you.
What is a Totten Trust?
A Totten trust is a revocable trust that is a payable-on-death bank account with a beneficiary named. Totten Trusts are a way to leave money to your heirs rather than property or other assets. An Illinois Totten Trust, also known as a payable-on-death account, is ideal for deposits of more than $100,000. The trustee of the account is the account starter. The beneficiary does not have access to the funds until the account holder dies.
The following are the primary advantages of establishing Totten Trusts:
- Creditors may not make a claim against a Totten Trust after it has been passed on to the beneficiary. Creditors can still claim your assets for unpaid debt while the account holder is alive.
- Because the Totten Trust is revocable, the account owner can change the terms of the trust at any time and even close the account.
- Totten Trusts are a simple way to transfer money after someone dies while avoiding probate. Totten trusts are well-known among banks.
Why Are Totten Trusts Used?
Totten trusts are popular among most people because they are an easy way to transfer money at death. It is a method of avoiding probate court proceedings, and the payout is made directly to the beneficiary.
It is also relatively simple to set up a Totten trust because it can all be done through your bank. You will most likely be required to fill out and sign a request form by the bank. They would then establish a Totten trust or POD account in your name, with you as the named beneficiary.
Your beneficiary will have no rights to the money held in the trust during your lifetime. This means they can’t withdraw money or claim assets as their own while you’re still alive. You will also be able to close the account, withdraw funds, and change beneficiaries if you so desire.
Your beneficiary will be able to claim the funds without any difficulty if you die. There may be a brief waiting period, but the funds will not be subject to probate court proceedings. Totten trusts are a popular estate planning tool due to the ease and flexibility they provide; as well as the benefit of avoiding probate court.
Is Totten Trusts a Legitimate Trust?
Although a Totten trust contains the word “trust,” one could argue that it is not a true Trust. A Totten trust is essentially a bank account, whereas a traditional trust is a legal document. Furthermore, funds from a Totten trust are distributed all at once and immediately upon death. This is in contrast to a traditional trust, which allows you to control the timing and nature of fund distribution.
They are, however, similar in that they can produce similar results. When you create Totten trusts, you act as both the grantor and the trustee; and you can name the beneficiary. Traditional trusts and Totten trusts are both tools for transferring wealth to loved ones and avoiding probate proceedings.
To summarize, both Totten trusts and traditional trusts can help you achieve similar results; but they are not structured the same way and frequently serve different purposes.
What Is the Difference Between a Totten Trust and a POD?
There is no difference between a Totten trust and a payable on death (POD) account. The Totten Trust was named after a 1904 court case. However, in modern times, the term “payable on death” (POD) account is more commonly used. This is most likely due to the latter name being more descriptive of the account type’s function; making it easier for people to understand. The person who uses either term is correct. Totten Trust or Payable-on-Death (POD) accounts are both informal revocable trusts; that instruct banks on how to distribute account assets when the account holder dies.
Totten Trust California
What happens to your bank accounts after you die? A Totten trust is one method for dealing with bank accounts in California. A Totten trust or “payable on death” (POD) account. The account holder, known as the settlor of the Totten trust, deposits money in the bank account with instructions; that the funds in the account pass to a named beneficiary upon the settlor’s death.
Although the Totten trust was founded in New York, it is now widely accepted in California. Totten trust accounts were, in fact, included in the California Multiple-Party Accounts Law. Sections 5100-5407 of the California Probate Code By using Totten trusts, the settlor is able to avoid probate court. As a result, the money in the Totten trust is automatically paid to the beneficiary without the need for probate.
If you have any further questions about Totten trusts or estate litigation; you should speak with an experienced Los Angeles estate litigation lawyer. Totten trusts are governed by legislation in California, and it is not required that payment to the beneficiary be mentioned; in the deposit agreement in accordance with California Probate Code 80. Rather, it is frequently created using a form provided by your bank. The depositor fills out the form and specifies who they want to be the trust’s beneficiary.
Retaining experienced and professional attorneys to assist with the creation of your Totten trusts is advantageous; particularly in preparing detailed instructions on who should be designated and any required information to access the account.
Totten Trust Florida
A “transfer on death” account or a Totten trust allows joint account holders (of a bank account, for example); to specify who receives the funds or assets when the second owner dies. These accounts are managed in accordance with state law; for example, Florida does not allow real estate to be transferred via transfer on death deeds; instead, it has a “Lady Bird” deed, which functions very similarly to a transfer on death deed; in allowing ownership of the real estate to be transferred to a beneficiary outside of probate.
The Totten Trust Law in Florida
A transfer on death beneficiary can still receive other accounts and real/personal property, except for retirement accounts such as IRAs; which are governed by federal law. In Florida, assets passed on in this manner are governed by the Totten trust statute; which states that an account passes to the named beneficiary upon your death, bypassing probate. These beneficiaries can include children, friends, relatives, and so on; however, when a transfer on death account agreement provides funds to someone other than the spouse; the spouse must provide consent.
Totten Trust Taking Control & Potential Hurdles in Florida
Taking control of the account is typically a simple and straightforward process: a death certificate and ID; as provided to the account custodian (i.e. bank), are usually all that is required. However, keep in mind that these accounts are still technically part of the decedent’s estate; may be subject to taxes and creditors. Furthermore, having more than one beneficiary involved complicates the process.
If no beneficiary is named in a transfer on the death account; the account is paid out to the estate, and the decedent’s will takes over. To learn more, please contact Florida Probate Lawyers.
How to Avoid Probate with a Totten Trust
If you want to avoid probate, Totten trusts are an excellent choice. Probate proceedings can be time-consuming and expensive, reducing your beneficiary’s inheritance. Furthermore, waiting to receive your rightful inheritance can add stress during a difficult time.
You can have peace of mind knowing that funds placed in a Totten trust will be released immediately; directly to your loved ones. Your death is the triggering event. Totten trusts are also advantageous because they are revocable; which means that you can modify them at any time during your lifetime.
Although you’ll need to set up a revocable trust for any other assets you want to pass on; Totten trusts are a great way to cover your bases for any cash you’ve saved in bank accounts.
Set up your Totten Trust right away.
If you want your loved one to be able to easily collect bank funds after your death; a Totten trust is a great option. Not only will these funds avoid probate, but your beneficiary will have immediate access to the funds upon your death. This can give you peace of mind; knowing that your loved one will have an immediate layer of support after you’ve passed away.
Contact your bank to set up a Totten trust. Keep in mind, however, that a Totten trust should be used in conjunction with a proper will; as well as a revocable or irrevocable trust if you choose to include one in your estate plan. This is due to the fact that Totten trusts are essentially just a modified version of a bank account; in which you can name a beneficiary. They do not cover any other aspects of estate planning, such as including a health care directive; arranging for guardianship, or managing the various types of assets that will be included in your estate.
Frequently Asked Questions
What is a difference between a Totten trust and a living trust?
The only real difference between a Totten trust and a will is that you name a beneficiary who receives the money in the account when you die. The Totten trust was named after a 1904 legal case in New York.
What is an inter vivos trust?
An Inter Vivos Trust is one that is established by a living person for the benefit of another living person. This trust, also known as a living trust, has a duration that is determined at the time the trust is created and can include the distribution of assets to the beneficiary during or after the trustor’s lifetime.
What is difference between POD and TOD?
A POD account is an abbreviation for “payable on death” and is commonly used in conjunction with bank accounts such as checking, savings, or Certificates of Deposit. TOD accounts, which stand for “transfer on death,” are commonly used with brokerage accounts, stocks, bonds, and other investments.
Is a POD account part of an estate?
When money is left to a payable-on-death beneficiary, it is not distributed in accordance with the terms of the deceased person’s will. That means the money is not part of the deceased person’s probate estate and is not under the executor’s control.
