There are many ways in which a person can pass on property to others upon death. Some methods take longer than others to get through the probate process, while other methods avoid probate altogether. In fact, most people are advised to use estate planning tools that avoid probate, and this is true in situations where a person want to pass on the contents of a bank account. One way in which a person can avoid probate while passing down a bank account is to create a Totten trust.
Totten trusts, which are recognized under Michigan law, are bank accounts which are payable to a named beneficiary upon the death of the account owner. Totten trusts are sometimes called payable on death accounts, or revocable bank account trusts. To form a Totten trust, the account owner has to complete some paperwork and deliver it to the bank in which the bank account is held. After the account owner dies, the beneficiary has to present a copy of the account owner’s death certificate in order for the funds in the account to be distributed.
The person who opens the account owns it as a trustee, but has the right to use the account as though it was a personal account because the formation of the trust does not create any immediate rights for the beneficiary. This means that the person can use all the money in the account for his or her own use, transfer the funds, or even close the account, without having to ask for the beneficiary’s approval.
The beneficiary cannot sue the account holder to force the account holder to stop spending the money in the trust. In most cases, the beneficiary does not know that he or she is a named beneficiary until the account owner’s death. The account holder can also change beneficiaries at any time.
The beneficiary gets rights to the account after the death of the account owner. This usually happens without any court orders or other legal intervention. If the Totten trust is properly set up, the bank should have signed paperwork designating the beneficiary and instructing the bank to make distributions upon the death of the account owner.
Although they are not formed like other trusts, Totten trusts can be held to have revoked an earlier express trust that sought to distribute the contents of the same bank account. Therefore, even if the contents of a bank account were previously included in property covered under an express trust, and the testator then creates a Totten trust over the accounts, the Totten trust will be honored. This will be the case even if the beneficiary under the express trust is different from the beneficiary under the Totten trust.
Contact Us for Legal Assistance
For more information on how you can plan to distribute assets to beneficiaries without using a will, you should contact an experienced estate planning attorney. To put together an estate plan that addresses your individual needs and wishes, contact Resnick Law, P.C., to consult experienced estate planning attorneys in Bloomfield Hills and Detroit, Michigan.
(image curtesy of Grace Stroke)