A revocable trust is a flexible financial arrangement designed to manage assets during one’s lifetime and efficiently distribute them after death. Having a revocable trust often bypasses the lengthy and costly probate process. This makes it easier to distribute assets to beneficiaries promptly.
This type of trust can be changed or even completely revoked by the person who creates it, known as the grantor. While alive, the grantor can manage the trust assets and benefit from them, making it a valuable tool for financial planning.
What is a Totten trust?
A Totten trust, also known as a payable-on-death account, is a unique type of revocable trust that is much simpler to set up than a traditional revocable trust. The grantor opens a bank account with a Totten trust and designates a beneficiary.
The grantor can deposit or withdraw funds as they please during their lifetime, and upon their death, the remaining balance is transferred directly to the designated beneficiary, avoiding probate. The beneficiary doesn’t have access to the funds until the grantor passes away.
While wills and trusts often work in tandem for estate planning, they serve different functions and should be treated as separate entities. It’s crucial not to put the details of your revocable trust in your will. This is because the specifics of a will become public record once it goes through probate, which could expose the details of your trust. Additionally, including your trust in your will could create legal conflicts and complicate the process of asset distribution.
Understanding how to include trusts in an estate plan is valuable for anyone who has considerable assets. Typically, working with someone familiar with your situation is beneficial.