One estate plan add-on that many Chicago residents find useful is a Totten trust. While that name may sound unfamiliar, these so-called “trusts” are actually just payable-on-death checking accounts.
So, what’s the use for a Totten trust in your estate plan? Read on to learn more.
What they are
The name stems from an early 20th-century court case out of New York, in re Totten, that determined that others have the right to open bank accounts for individuals. The case law was eventually accepted by other states and the name spread.
But there is no financial intrigue associated with Totten trusts. Any account holder can add a friend or relative’s name to their account to pass to them upon the account holder’s death.
What they can do
They bypass probate, meaning that they are accessible to the survivor in the immediate weeks and months after the death. This is important if the individual will need cash long before the estate wends its way through the Illinois probate courts.
Totten trusts are held separately from the estate and thus are not public. For situations where privacy and discretion are paramount, this is a major benefit.
Who might be listed on these accounts?
Anyone with whom the decedent felt particularly close, e.g., a loyal employee, special friend or even a neighbor who was always willing to lend a hand in a crunch.
Account holders retain full ownership of the accounts during their lifetime and are free to make deposits and withdrawals, change beneficiaries or even close the accounts. They provide instant liquidity and are another form of estate planning vehicle that many can use.
