Should Totten trusts be part of your California estate plan?

On Behalf of | Mar 1, 2024 | Trusts

Totten trusts, also known as payable-on-death (POD) bank accounts, are gaining traction in California estate planning. But are they the right fit for you? 

Below, we delve into their benefits and downsides to help you decide.

What is a Totten trust?

Imagine a bank account designated for a beneficiary, but with you managing the funds until your passing. That is the essence of a Totten trust. You retain control during your lifetime and use the funds as you see fit. Upon your death, the remaining balance automatically transfers to the beneficiary.

What is their appeal?

Creating a Totten trust is remarkably easy, which appeals to many. A quick trip to the bank to sign some papers and deposit funds is all that is required. Another appeal is their flexibility – you can use them apart from will designations. Totten trusts also need not pass through probate, a huge advantage for many.

What are the drawbacks?

One possible disadvantage is that they are solely for cash and cannot accommodate real estate or other complex assets. Further, the funds in a Totten trust remain part of your estate and could lead to heavy tax burdens.

Who are they for?

Contrary to popular belief, anyone can benefit from creating Totten trusts, regardless of the size of their estate. When properly created and managed well, they can be an ideal way to fill any gaps in your estate plan, even if you have significant wealth.

Consider speaking with an estate planning representative to explore all your options. Your collaboration can give you peace of mind about the strength of your estate arrangements.



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