A Totten trust (also referred to as a "Payable on Death" account) is a form of trust in the United States in which one party (the ''

settlor In trust law, a settlor is a person who settles (i.e. gives into trust) their property for the benefit of the beneficiary. In some legal systems, a settlor is also referred to as a trustor, or occasionally, a grantor or donor. Where the trust is ...

'' or "

grantor A grant, in law, is a transfer of property, generally from a person or other entity giving the property (the grantor) to a person or entity receiving the property (the grantee). Historically, a grant was a transfer by deed of that which could not ...

" of the trust) places money in a

bank account A bank account is a financial account maintained by a bank or other financial institution in which the financial transaction A financial transaction is an Contract, agreement, or communication, between a buyer and seller to exchange goods, ...

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 when a bank account is titled in the form " epositor in trust for eneficiary.

Origin

The name is derived from ''Matter of Totten'', 179 N.Y. 112 (1904), the case decided by the

New York Court of Appeals The New York Court of Appeals is the supreme court, highest court in the Judiciary of New York (state), Unified Court System of the New York (state), State of New York. It consists of seven judges: the Chief Judge of the New York Court of Appeal ...

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 Will may refer to: Common meanings * Will and testament, instructions for the disposition of one's property after death * Will (philosophy), or willpower * Will (sociology) * Will, volition (psychology) * Will, a modal verb - see Shall and will ...

, the

Court A court is an institution, often a government entity, with the authority to adjudicate legal disputes between Party (law), parties and Administration of justice, administer justice in Civil law (common law), civil, Criminal law, criminal, an ...

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 In common law jurisdictions, probate is the judicial process whereby a will is "proved" in a court of law and accepted as a valid public document that is the true last testament of the deceased; or whereby, in the absence of a legal will, the e ...

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

or creator of the trust account.

Totten trusts today

Most

U.S. state In the United States, a state is a constituent political entity, of which there are 50. Bound together in a political union, each state holds governmental jurisdiction over a separate and defined geographic territory where it shares its so ...

s 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. A Totten Trust is classified as a "testamentary substitute" because it avoids the need for the assets held in the account to go through probate. Totten trusts can be created only with certain types of depository accounts or securities; in particular they can not be used to convey

real property In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, refers to parcels of land and any associated structures which are the property of a person. For a structure (also called an Land i ...

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

References

Property law Personal finance Banking in the United States Wills and trusts {{law-term-stub

Origin

Totten trusts today

See also

References