Estate planning can be overwhelming but is nonetheless one of the most critical tasks you may ever undertake. Incorporating simple tools like Totten trusts can make it easier to give to certain people.
A Totten trust (AKA payable on death account) is merely a bank account. The account holder completes a document at the bank specifying that any remaining funds go to a named beneficiary upon their death. Here is how a Totten trust could strengthen your existing plans.
Value and protection
Totten trusts enhance estate plans by offering a flexible way to distribute specific assets that you did not address in your will. Here are two situations where they can be especially useful:
Disbursements outside the will. Not everyone you want to bestow a final gift upon needs a place in your will. A Totten trust allows you to designate a friend, caregiver or a charity to inherit the funds left in your account when you pass.
Seamless bank account distribution. Payable-on-death funds pass directly to the beneficiary after your passing, avoiding probate. These trusts can simplify the inheritance process and prevent potential delays for your account beneficiaries.
A mere piece of the puzzle
Totten trusts cannot replace a comprehensive estate plan. Other critical documents are still needed, including:
- A final will for asset distribution and to name guardians for minor children
- Other trusts (asset protection trust, spendthrift trust, etc.) for distributing complex assets and protecting heirs
- Financial and healthcare directives so that your economic affairs carry on and your medical wishes are honored if incapacitated
There are many more tools to learn about. Someone familiar with estate planning in Virginia and the DC area can help you get started.