If you are putting your will and other estate planning documents in place this year, you’re likely concerned largely with what assets you will be leaving to your heirs and other beneficiaries. Most people who get professional estate planning guidance want to make the transition of assets as smooth as possible – for example, by keeping them out of probate. They also generally try to choose the most competent, trustworthy person they know to be their estate’s personal representative (executor).
It’s also critical to make sure there is enough money available in the days following your passing to cover immediate expenses. This would likely include burial, cremation and funeral expenses. You might also want to have money available for any bills that need to be paid, such as utilities, mortgage and more. If adult children or siblings will need to travel some distance and stay in a hotel or rent a car, you may want to be able to help them out.
You might just assume that people will pay for things out of their own pocket and that their inheritances or funds from the estate will provide reimbursement. However, that can take some time, even if probate is uncomplicated. A lot of people don’t have extra money available these days or want to rack up credit card bills and interest. This is one reason why it’s worth establishing a Totten trust
How does a Totten trust work?
A Totten trust (also known under Pennsylvania law as a “tentative trust”) isn’t a trust as most people think of them. It’s a payable-on-death (POD) account that you can establish at a financial institution. You can designate one or more beneficiaries (typically your executor) who can access the funds only after you’re gone. The funds bypass probate so are available once they present a death certificate and identification.
To be of any use, of course, you’ll need to let a beneficiary know about this account so they can access it as soon as they need to after you’re gone. It can be helpful to let them know how much you’re putting it in and for what purposes you intend it.
A Totten trust is just one way to make things easier for your loved ones and help ensure that your wishes for your funeral or other ceremonies are honored. Getting sound estate planning guidance is a good first step.