A Totten trust is a bank account some California residents establish during estate planning. Any assets you place into the account are transferred to a beneficiary after death. A Totten trust goes by other names, including a tentative trust or a payable-on-death bank account.
Understanding how a Totten trust works
You’ll create your Totten trust when you’re planning an estate and making decisions about who will receive your assets. Creating this type of trust is usually as simple as going to a bank and completing the proper paperwork. You’ll have to choose a beneficiary for the account, such as a spouse, friend, family member or an organization.
When does the beneficiary get the money?
You’re the trustee of the Totten trust and have complete control over the account. The beneficiary is unable to access the money while you’re alive. You can deposit and withdraw money from the trust without penalty. It’s also possible to add or remove beneficiaries.
You also have the option of closing your Totten trust. If you want to close the account, you can remove all of the assets or provide written instructions telling the bank to close the account. If there’s one beneficiary and they die before collecting the assets, that also revokes the trust.
Benefits of a Totten trust
Some people like that a Totten trust makes it possible to avoid probate. During probate, wills are validated and asset distribution is decided. Probate typically lasts for a year but can take longer if complications arise. Including a Totten trust in your estate planning generally means your beneficiaries won’t have to wait to receive the funds.
A Totten trust usually doesn’t require probate. Following your death, the assets in the trust are transferred to your beneficiary. The bank handles the transfer, so there’s no need for anyone to validate the account.