What is a Totten Trust?

Oct 25, 2022 | Financial Trust Legal Blogs | Elder Law P.A

We live in a complex world in which estate planning has become of great importance if you plan to transfer your estate to your beneficiaries. What is a Totten Trust? Over the years, many types of trusts have been developed for the transfer of the estate to beneficiaries, and one of them is called the Totten Trust.

Most people do not like to discuss death, but when it comes to your money and estate, it is important. If you fail to make any arrangements for your money or estate, after your death your family will be left with many things to try to figure out on their own. If they cannot come to an agreement, which, sadly, often happens, and decide to fight for your estate, this can be a terrible hurdle to try and navigate while they are also grieving your loss. One of the ways you can be of enormous help to your family and/or beneficiary(ies) is by creating a Totten Trust, which essentially is a bank account where you name a beneficiary.


A Totten Trust is also referred to as a “payable on death” document. In the simplest terms, it is a bank account that is opened by the individual and a beneficiary is named. Following the death of the individual who opened the bank account, all the money in the account goes directly to the named beneficiary.

Aside from this feature, this type of trust will function similarly to a normal bank account. The individual who opens the account is able to add, withdraw, or close the account at any time. In addition, if the individual wants to change the beneficiary, he or she is able to do so. The key thing to remember about this type of trust is that the beneficiary you name will be the recipient of the funds in the account when you pass away.


While this type of trust may not be for everyone, consider these reasons why you may want to choose it:

  1. When you open this type of trust, you bypass probate. The money in the bank is transferred to the beneficiary without going through probate. In general, the majority of estates go through probate after the grantor has died. During probate, the contents of the estate are tabulated, their worth is determined, and the will, assuming there is one, is validated. After the probate court process is over, the estate is distributed to the named beneficiaries stated in the will.
  2. Probate may not sound like a big deal for people with a small estate, but for those with large estates, probate is very time-consuming and an expensive venture. It can take many months or even years to sort out the creditors, lien holders, beneficiaries, etc. Probate is also a public matter and there is no privacy. All probate proceedings are open to the public and become part of public records. This type of trust is private, and no one is privy to the information or even knows who you have named as a beneficiary.
  3. With this type of trust, there is already a beneficiary named. Thus, when the creator of the trust dies, the money is transferred to the beneficiary. The only difference is that the beneficiary has access to the bank account only after the death of the creator. This way one can be assured that the beneficiary will not access the bank account and spend the money before the death of the grantor.
  4. These trusts are considered an informal form of revocable trust; this means you can make changes to the trust whenever you want.


To open such a trust account is a relatively simple process. One opens a bank account by showing the relevant identification. Once the bank account is set up, one also names the beneficiary. To make the bank account active, one has to make a deposit of money. There is a minimum amount required by all banks. It is not much different than a regular bank account; it can be a regular checking and/or savings account.


The one disadvantage of this trust is that the only asset that can be stored in it is cash. If you have a property that you want to pass on to your loved ones, perhaps a living trust may be a better option. A living trust is another legal entity that one can create for the transfer of assets, including property to the beneficiary. Whereas with this type of trust you can only store cash in a bank, with a living trust, you can store stocks, bonds, cash, jewelry, family heirlooms, vehicles, and even property. Like a Totten Trust, a living trust permits you to bypass probate. All you need to do is identify your beneficiaries and create a set of instructions on how you would like the estate to be distributed after your death. While the Totten Trust is managed by a bank, the living trust is managed by an appointed trustee who can be a lawyer, legal entity, friend, family member, etc. The trustee will be responsible for maintaining the trust and ensuring that the estate is distributed according to the directives stated in the trust.

If you only have cash that you want to go to a beneficiary, then a Totten Trust may be a good option for you.

Limitations of a Totten Trust

  1. It only holds cash and, thus, if you have other assets that you want to pass to your beneficiary, you cannot use this trust for that purpose.
  2. You can only name one beneficiary.
  3. You have no control over how the money will be distributed to the beneficiary after your death. Even if you were to name multiple beneficiaries on this trust account, you cannot specify how the money should be distributed. The bank simply splits the money equally.
  4. This type of trust does not protect you from those you owe money to.
  5. This type of trust only becomes active after your death.


What is a Totten Trust? It is a bank account that has a beneficiary. The person who creates the account names the beneficiary of his/her choice. It is also called a “payable on death account.” Upon your death, the funds will transfer to your beneficiary. A lengthy probate process will not have to ensure. A Totten Trust only holds cash. This means you can’t use this type of trust to pass on physical property, such as vehicles or houses. If you have money or an estate you wish to pass on to your loved ones, the best recommendation is to consult with an estate lawyer. Today, there are many options available to transfer the estate to loved ones but knowing which one is the best option for you will be a calculated decision and it is best to seek advice from a knowledgeable attorney.

Elder Law, P.A. serves just this purpose, and we are very experienced with the needs of seniors, such as discussing the differences between various methods of transferring your estate to your loved ones after your death. Call us today at (561) 588-7512 for a free consultation.

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