Forbes has named the Totten Trust as one of the six types of trusts for the person who has everything. A Totten Trust is a type of trust account that is established at a local bank. Totten Trusts originated as a method of creating trusts for people who possessed no real property and could not afford to draft a will. The Totten Trust, however, still serves a useful function. The individual who establishes the trust is known as the “depositor” because the individual deposits money into the trust account. The recipient of the trust is called the “beneficiary.” The depositor then deposits a sum of money into the account for the beneficiary, which is paid to the beneficiary on the date of the depositor’s death. Prior to the depositor’s death, the depositor may add to or withdraw money to the account at any time. Upon the depositor’s death, the beneficiary can present an original death certificate to the bank to obtain proceeds from the trust. For clients who are planning an estate there are several advantages to Totten Trusts, which include the following:
- Anonymity: A Totten Trust can be anonymously created without even the beneficiary learning of the account’s existence until the date of the depositor’s death.
- Beneficiaries Cannot Access the Trust: California code dictates that a Totten Trust only grants the beneficiary an expectancy interest while the depositor is alive and the depositor is able to decide at any point in time to change who the named beneficiary is.
- Beneficiaries Have an Easier Time Accessing Fund:. After the depositor’s death, all that a beneficiary needs to do is present the bank where the depositor made the Totten Trust with a certified copy of the depositor’s death certificate and a copy of the beneficiary’s government-issued identification.
- Depositor Maintains Complete Control: The depositor maintains complete control over the Totten Trust until the individual’s death. As a result, the depositor is allowed to use money within the account for living expenses.
- Easy to Open: Totten Trusts are easy to open in comparison to other types of trusts. All an individual need does is go to a bank, ask for the appropriate forms, fill out the required documents and turn this paperwork into the bank.
- No Tax Disadvantage: While the contents of a Totten Trust are used to calculate estate tax liability, there are no estate tax disadvantages to the establishment of a Totten Trust.
- Not Estate Assets: While assets remaining in a Totten Trust are factored into the calculation of estate tax liability, these assets are not considered part of the deceased individual’s estate and pass outside the realm of probatable estate assets. Because Totten Trust amounts pass outside probate law, Totten Trusts are invaluable when the deceased individuals does not leave behind a will.
If you are in the process of estate planning, you likely need the experience of a knowledgeable and informed lawyer to explain all of the options available to you so contact our firm today.