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What is Totten Trust

Foram Mehta Aug 24, 2020
The idea of Totten Trust was postulated in the year 1904 and it has now gained some recognition. This is a more renowned way of transferring funds without the complexities involved in making a will, in the USA.
As per a book by Gerald N. Hill, Kathleen Hill, Nolo (Firm), Totten Trust can be defined as, "A bank account that's held in trust for a beneficiary, who inherits any money in the account when the account holder dies. Probate proceedings are not necessary to transfer the money. A Totten trust works just like a normal bank account". Though the name is misleading as there is no trust really in existence.
A Totten trust is also known as 'Payable on Death account'. The term 'Totten Trust' is derived from a case called 'Matter of Totten', which was the main reason why this form of trust came into practice and got legalized.
This trust is officially used in the USA, in which the trust maker deposits a certain sum or security in a bank account and gives legal instructions, that on his/her death the trust should be transferred to the prescribed beneficiary.
This trust is known as a tentative trust because, it's transfer is dependent on the account holder's death. It is also addressed as a 'Poor Man's Will' because setting up this fund comes with almost no additional cost and there is no need to draft a special legal notice for the same.

An Overview

A Totten trust is an option offered by many banks today. Using this option the account holder states to transfer the money in his account to a particular individual or organization on event of his death. When the account holder is opening an account for himself he only has to select the option of Totten trust. The account will have his name endorsed followed by the words "in trust for". It really is that simple.


1. The account holder remains as the owner of the account until his death.
2. The beneficiary is entitled to receive the Totten trust only after the account holder dies.
3. The account holder has the right and the power to cancel the trust or to even change the nominee.
4. The beneficiary may not know about the trust, until the account holder's death.
5. The account holder can withdraw money, draw checks, and even close the account at his will.
6. It is an informal trust arrangement. Which means that it is not really a trust.
7. The beneficiary gets access to the account immediately after the account holder dies, without any intrusion by the court.
8. The account can hold almost anything. It can hold cash, securities in the form of gold, bonds, etc.


1. The account holder can transfer his funds to the beneficiary without giving him any right to operate the account, until his death.
2. If the account is a joint account, then the beneficiary cannot claim his right on the trust until both the account holder don't pass away.
3. The beneficiary gets the account transferred in his name without the interference of the court.
4. The account holder can at anytime, change the beneficiary and also close the account by merely filling a form to that effect.
5. The Federal Deposit Insurance Corporation insures the Totten Trust separately for an amount up to $100,000 for the beneficiary.
6. It is very easy to open and operate a Totten trust.


There is just one major disadvantage to the Totten Trust, which is that the Totten trust is not advocated for accounts with funds more than $20,000. This is because in a 'few states' the estate tax is needed to be paid before the account is transferred to the beneficiary.
It is very easy to set up a Totten Trust. Almost all banks and credit institutions offer this option. They may call it 'Transfer to Death' account. Out of all the states in the US only 36 of them acknowledge this type of an account. Therefore, not everyone is able to avail this facility.
Totten Trust is utilized by people as a testamentary substitute which saves an individual from the hassles involved in making a will. This trust is also used as a measure to hide a person's financial stand from others.