Deciding if a Totten Trust Is Right for You

Totten trusts are simple devices, and they may seem like an attractive alternative to more complex living trusts. The advantages of a Totten trust include the following:

  • Totten trusts are easy to establish.
  • The trustor is afforded exclusive access to the trust funds during their lifetime.
  • Upon the trustor’s death, any remaining funds are passed to an heir outside of the normal probate process.

However, convenient as they may be, Totten trusts are not without disadvantages. Since Totten trusts are cash-only accounts, they cannot be used to facilitate the transfer of other estate assets. Additionally, inherited balances are subject to taxation—often at high rates.

Under most circumstances, Totten trusts can be used to complement an existing estate plan, but they should seldom be used to form the basis of one.

Establishing a Totten Trust

Since Totten trusts cannot possess non-cash assets, they are typically much easier to establish than other types of revocable living trusts. Testators are also bound by relatively few requirements: they must be an adult, and they must have a valid Social Security number.

Establishing a Totten trust is otherwise a fairly simple and straightforward process. You should:

Talk to Your Bank

You cannot establish a Totten trust independently. If you believe that a Totten trust could complement your estate plan, talk to your bank about whether it offers Totten trusts or other payable-on-death account arrangements.

Nominate a Beneficiary

Every type of payable-on-death account, including Totten trusts, must include a named beneficiary. A beneficiary can be anyone: a spouse, a child, a family friend, or even a preferred charity.

After the Totten trust is established, the beneficiary can be changed at any time. However, trustors must exercise caution: if they update any element of their estate plan—the Totten trust or another document—they must carefully review their plan to ensure congruity.

Speak to an Attorney

You do not need a lawyer to open a Totten trust. However, the Law Firm of Kavesh, Minor & Otis, Inc. can help you assess your options to keep all of your assets out of probate and safe from potential challenges. 

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.