A special bank account commonly referred to as a Totten Trust in California is the topic of this article. This is a simple and effective method to avoid probate which is also known as a payable-on-death (POD) bank account. A POD account is basically a bank account for which you name a beneficiary, who inherits the funds in the account after your death. The budget crisis now affecting the Courts in California for the past several years has resulted in long delays in obtaining a hearing date, thus avoiding the time and expense of probate court proceedings is vital.
Naming a beneficiary using this particular method will not have any consequences while you are still alive. The beneficiary has no rights to the money during your life. This means that the beneficiary cannot withdraw any money, and that the money is not considered an asset of the beneficiary if the beneficiary gets divorced, runs up debt and is sued by creditors, or files for bankruptcy.
POD accounts are widely used for the simple reason that they provide an easy way to transfer money at death without the hassle and expense of lengthy probate court proceedings. Setting up a POD account or turning an existing savings or checking account into a POD account involves filling out some paperwork provided by the bank, naming the POD beneficiary. The documents must be turned into the bank, so that the bank has a record of who the beneficiary is.
You can close the account, withdraw some or all of the funds, or name a different beneficiary at any time. The money in the account isn’t protected from your creditors; it’s just like any other bank account.
It’s that simple. After your death, the beneficiary simply goes to the bank and collects the funds in the account. In California there is a short waiting period of 40 calendar days before a bank will release funds, but no probate court proceeding is required. Usually, all that’s required by most banks is evidence of the death such as a certified copy of the death certificate and proof of the identity of the beneficiary. Banks have been doing this for years, and they’re very familiar with the process as they are the ones who provide the forms on which account the owners designate their beneficiaries. Most credit unions are also familiar with this process as well.
This is a relatively simple method to avoid the time and expense of probate court that is underutilized.