A Totten Trust is a type of estate planning mechanism more commonly known as a “Payable-on-Death” (POD) account or an “In Trust For” account. The name “Totten” comes from a 1904 New York case, which was the first court ruling that allowed setting up a bank account in trust for a beneficiary.
With a Totten Trust, the owner of the account sets up a trust-like situation where the account is transferred or distributed to the beneficiary directly upon the account owner’s death. The account is not subject to a probate proceeding, and the account owner owes no duties to the beneficiary. So, the account owner can change their mind at any time regarding the bank account – change the beneficiary, withdraw money, add money, close the account, etc. A beneficiary under a Totten Trust has no right to control how the bank account is managed or used.
Even though the bank account will belong to the beneficiary immediately upon the account owner’s death, it can still be attacked by the account owner’s creditor after death. In other words, if the account owner left unsatisfied creditors at the time of his or her death, the creditors could recover the monies due to them from the Totten Trust bank account that was transferred to the beneficiary.
A Totten Trust arrangement can be cancelled if the beneficiary dies before the account owner, and it can also be cancelled by the account owner through his or her Last Will and Testament, only if the Will expressly mentions the bank account and provides contrary instructions for its disposition. Or, the account owner can simply withdraw the funds from the account and close it completely.
Will substitutes, such as Totten Trusts, are extremely useful in avoiding probate and covering your bases when considering a comprehensive estate plan. Schedule a call with the experienced Trusts & Estates attorneys at EPGD Business Law to learn how will substitutes can protect your assets and your family.
We can be reached at (786) 837-6787 or via info@epgdlaw.com.
*Disclaimer: This blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*
