How To Pre-Pay for Funeral Arrangements with a Totten Trust

If you are interested in setting money aside for your funeral but you are not interested in pre-paying any funds to a funeral home, a good option may be a Totten trust, also known as a “payable on death” account.

What is a Totten trust?

A Totten trust is an informal trust that is set up at a bank as a bank account. The person who sets up the Totten account is the trustee of the account, and can name any person as the beneficiary of the account. Because the money is held in an account that you manage, you may deposit as much or as little money in the account as you like. Upon your death, the money will immediately be made available to the named beneficiary, who can carry out your funeral wishes.

Totten trusts exist in your name, may be transferred from one bank to another, may be closed out at will, and, depending on the bank’s terms, may accrue interest over time.

How to set up a Totten trust

As a Totten trust is not technically a trust, establishing a Totten trust is a fairly simple procedure, and does not require an attorney or a trust agreement. Your bank will likely be able to help you set up a Totten trust, and you should be able to create the account in a matter of hours. You might consider talking to a number of different banks about their policies and protocols around creating and managing Totten trusts to find the bank that is right for you.

Communicating with your family

If you are setting up a Totten trust to pay for funeral arrangements when the time comes, be sure to tell your family that you've set up a Totten trust, and make sure your family knows which bank the Totten trust is at, who the beneficiaries of the Totten trust are, and where the paperwork for the Totten trust is located. By communicating with your family, you can make the process of getting the money in the Totten trust easier for them when the time comes.

To learn more about how to store important documents for your family, see our article Estate Planning Documents to Organize and Share.

Other ways to pre-pay for funeral arrangements

There are a number of other ways to pre-pay for funeral arrangements. Some of the most common ways include: