If you’re preparing to put your estate plan in place, you may be focused on the relatively long-term implications for your beneficiaries of the assets you leave them. You are likely also thinking about how to minimize stress for your loved ones in the months after you pass away – for example, by keeping assets out of probate.
What too many people don’t consider is the importance of having some money available in the immediate aftermath of their death for funeral and other expenses that need to be covered long before the estate may be settled. That’s especially important if you don’t have a spouse or other joint owner on your accounts.
It’s easy to assume that relatives can just put these expenses on their credit cards and get reimbursed when they receive their inheritances. However, they could end up spending thousands of dollars if they need to travel to Pennsylvania and stay here for a time, which can take a bite out of credit card lines.
How does a Totten trust work?
That’s where having a Totten trust can make a big difference. These are also referred to under Pennsylvania law as “tentative trusts.” A Totten trust isn’t a traditional trust. It’s a payable-on-death (POD) account that you can open at any time at a bank or other financial institution.
When you open a Totten trust, you designate one or more beneficiaries who can access the funds after you’re gone. They don’t go through probate. People often make their estate executor their beneficiary.
When determining how much to put in this account, you’ll want to consider what kind of burial and funeral arrangements you want and get some pricing. Likely, you don’t want your family asking for donations for your final send-off via a GoFundMe site. You’ll also want to consider other expenses your executor or other family members may have to deal with.
Make sure your beneficiary knows about it
It’s crucial to let your designated beneficiary for the Totten trust know about it. They should know what institution has it, how much is in it, what you intend the funds to be used for and what document(s) they need to access the funds (such as your death certificate). Your will then should indicate whether and how inheritance tax should be paid on the transferred funds.
This is just one example of things you can do outside of your actual estate plan documents to help things go more smoothly for those you leave behind. By having experienced estate planning guidance, you can discover more.