Totten trust

An arrangement between a bank or credit union and a client that designates beneficiaries to receive all the client's assets. The immediate transfer of assets is triggered by the death of the client.

Also referred to as a "totten trust."

Investopedia Says:
POD accounts are created by filling out the proper forms at your bank or credit union. It is a cost-free service that allows for the transfer of all checking and savings accounts, security deposits, savings bonds and other deposit certificates. A POD account is very similar to a transfer-on-death arrangement, but deals with a person's bank assets instead of their stocks, bonds, mutual funds or other assets. Both POD and TOD agreements offer quick means of asset dispersement, as both avoid the probate process, which can take several months.

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Informal trust in which assets deposited into an account are controlled by the person creating the trust, the Grantor and held in trust for another, who is named as Beneficiary. When the account owner dies, the account is transferred to the beneficiary, but taxed as part of the grantor's estate. If the account is jointly owned, the regulations covering joint accounts apply. When all the owners of the account die, the beneficiary becomes the lawful owner.

An arrangement created by a person depositing his or her own money in his or her own name in a bank account for the benefit of another.

A Totten trust is a tentative trust, revocable at will, until the depositor dies or completes the gift in his or her lifetime by some unequivocal act or declaration, such as delivery of the passbook or notice to the beneficiary. If the depositor dies before the beneficiary without revocation or some resolute act or declaration of disaffirmance, the presumption arises that an absolute trust was created as to the balance on hand at the death of the depositor.

The beneficiary need not know about the arrangement, and the depositor is entitled to deposit and withdraw funds from the account as he or she deems fit. The depositor can even close out or revoke the account without obtaining the beneficiary's permission. When the depositor dies, any funds in the account automatically become the property of the beneficiary, but they might be subject to the claims of the decedent's creditors. Totten trusts are usually established to avoid the inconvenience of making a will and the expense and delay of probate and administration. Such an arrangement is known as a testamentary substitute, since a will is thereby obviated. Frequently such trusts are established because the depositor wants to conceal his or her financial situation from others.

The noun has one meaning:

Meaning #1: a savings account deposited by someone who makes themselves the trustee for a beneficiary and who controls it during their lifetime; afterward the balance is payable to the previously named beneficiary
  Synonyms: savings account trust, savings bank trust, trust account, trustee account

Wills, trusts and estates

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Governing doctrines Pour-over will Cy-près doctrine Trusts and conflict of laws

Estate administration

Intestacy · Testator · Probate Power of appointment Simultaneous death · Slayer rule Laughing heir · Advancement Disclaimer of interest · Inheritance tax

Related topics

Advance directive (Living will) Totten trust

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Contract · Tort · Property Criminal law · Evidence

v • d • e

A Totten trust (also referred to as a "Payable on Death" account) is a form of trust created where one party (the settlor of the trust) places money in a bank account or security with instructions that upon the settlor's death, whatever is in that account will pass to a named beneficiary. For example, a Totten trust arises where the account is titled in the form "[depositor], in trust for [beneficiary]".

Origin

The name is derived from Matter of Totten, 179 N.Y. 112 (1904), the case decided by the Court of Appeals of New York which established the legality of this practice. Although this method of creating a trust did not meet the formal requirements of trust creation, or the testamentary formalities required to make a valid will, the Court noted that such an arrangement typically involved a small amount of money left by a person of modest means, who could not otherwise afford to establish a legal mechanism for passing the specified property. For this reason, the device is sometimes called a "poor man's will". The funds in question are not subject to probate and, if held in a bank account, are insured in the same manner as any deposit. The beneficiary has no access to the account until the depositor's death and need not be notified that the account exists. This is also called a tentative trust because it is contingent upon the death of the settlor or creator of the trust account.

Totten trusts today

Most U.S. states now recognize the validity of Totten trusts. The Restatement 3d of Trusts (Section 26) and the Restatement 3d of Property (Section 7.1 comment i) also recognize its validity. Such a device can be revoked at any time by the settlor, either by closing the account or by executing a will which disposes of the property in the account. The funds in the account can be reached by the creditors of the settlor during the settlor's life. If the intended beneficiary predeceases the settlor, then the gift will lapse, and will generally not be saved by an anti-lapse statute.

Totten trusts can only be created with certain types of depository accounts or securities; in particular they can not be used to convey real property.

More generally, totten trusts are sometimes described as "Arrangements for deposit accounts."

References

• Encyclopedia of Everyday Law: Trusts

See also: Purpose trust

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