There are a number of different ways to accomplish this objective, and you should explore all of your options so that you make the optimal choices.
There is no one-size-fits-all estate plan. The best way to transfer assets is going to vary on a case-by-case basis.
We like to educate people about the various different ways that assets can be transferred. With this in mind, we will look at Totten trusts in this post.
Payable on Death
A Totten trust may sound like something that is rather complicated, and some people think that all trusts are complex. However, this type of trust is quite simple.
When you open an account at a bank or brokerage, you will probably be offered a payable on death or transfer on death option. With this type of account you can add a beneficiary. These payable on death accounts are alternately referred to as Totten trusts.
The beneficiary that you name when you create the account would not be able to touch the assets while you are alive. You have full control, and you can spend everything in the account if you want to, and you can close the account. It would also be possible to change the beneficiary, and the institution may allow you to add multiple beneficiaries.
After you die, the beneficiary would assume ownership of any remainder that may be left in the account.
Probate is the legal process of estate administration. If you had an account without a beneficiary, and you named someone in your will to inherit the money in the account, the transfer would be subject to the probate process.
This is a time-consuming process, and it will take close to a year even if there are no complications. The heir would not receive his or her inheritance during this interim.
When you have a Totten trust, the beneficiary would inherit the resources outside of probate, so the transfer would take place in a much more timely manner.
While this can sound like a good arrangement, there are various different drawbacks that go along with Totten trusts. You can’t account for the possibility of incapacity, and you gain no tax benefits. Assets in the trust are not protected, and Medicaid would count these assets if you were to see eligibility.
Many elders seek Medicaid eligibility late in their lives, because Medicare does not pay for long-term care.
These are just a handful of the drawbacks, but there are others.
Custom Crafted Estate Plan
A Totten trust can be better than nothing on some levels, but there are more comprehensive solutions. If you would like to put a custom crafted estate plan in place, send us a message through this link to set up a free consultation: Smithtown NY Estate Planning Attorney.