What is a Totten Trust?
Setting up a Totten Trust is as simple as going to a bank and opening a Trust account by yourself. A Totten Trust is best for amounts of about $20,000 or less. Larger amounts could present problems in payment of estate taxes at your death, since the assets in these accounts are added to your taxable estate. A Totten Trust can be paid out quickly after your death with a minimum of formalities. Because the money transfers directly, you don`t need to choose a third-party Trustee. As with any other Trust, you keep your assets out of probate. You can revoke a Totten Trust at any time during your life, and the beneficiary can`t withdraw the money from the Trust account until you die.
A Totten trust, also called a payable on death (POD) account, is a form of estate planning in the US. It can be used as an alternative to a will and is therefore known as a type of will substitute. A Totten trust involves a bank savings account or security which is established by someone (known as the settlor or grantor) who is the named trustee for another person (the beneficiary). The beneficiary will receive the funds in that account or security when the settlor dies. A Totten trust has nothing to do with acting as a trustee under a will, a trust agreement, or a court order. Totten trusts are sometimes created for the purpose of setting aside funds to finance the settlor’s (or trustee’s) funeral. Upon the death of the settlor, the savings account is then payable to the beneficiary as a means of reimbursing the beneficiary for funeral expenses. A caveat does apply here though: any claims pursued by the trustee’s creditors are paid before the beneficiary is paid. Consequently, the ben
Setting up a Totten Trust is as simple as going to a bank and opening a Trust account by yourself. A Totten Trust is best for amounts of about $20,000 or less. Larger amounts could present problems in payment of estate taxes at your death, since the assets in these accounts are added to your taxable estate. A Totten Trust can be paid out quickly after your death with a minimum of formalities. Because the money transfers directly, you don`t need to choose a thirdparty Trustee. As with any other Trust, you keep your assets out of probate. You can revoke a Totten Trust at any time during your life, and the beneficiary can`t withdraw the money from the Trust account until you die.
The term Totten Trust is used to describe a type of informal trust. It exists where there is no formal written trust agreement and a person simply sets up a deposit account in his own name, followed by the words “in trust for.” The person who sets up the account is deemed to be the owner of the funds, and the person that it says the account is “in trust for” will be entitled to the funds after the owner’s death. Here’s an example: Haskell set up an account as follows: Haskell Baker in trust for Jody Baker. Jody is his daughter (but the law doesn’t limit these accounts to family relationships. She could just as easily be his friend, or a co-worker, or whoever he wants to be generous to). Haskell is considered the sole owner of the funds during his life. He can write checks, make withdrawals, even close the account, if he so desires. Jody doesn’t have any right to the money while Haskell is alive. In fact, Haskell may choose to not even tell her she is named on the account as a Totten tr
