Totten Trust

Basically, it's a way to bequeath funds, such as bank deposits, and some securities, in your account, to your heirs. Since it is not really a trust, there is no trustee. It's structured so that you have full use of the funds while alive, and then upon your death, the assets go to your beneficiary.

Where can I open up one of these accounts?

All Banks, Savings & Loans, and Credit Unions offer these accounts at no cost. A brokerage firm offers a similar type of account, known as a 'transfer-on-death" (TOD) account. Currently 36 states allow this type of account arrangement , so you would need to check with your broker to see if your state offers this account.

What can I put in this account?

You can hold cash, US treasury securities, US saving bonds. Brokerage accounts permit some securities.

What is not allowed in this account?

Loans are not available on a Totten Trust.

What are some advantages of a Totten Trust?

1-You can name a co-trustee to have access to the account.

2-The beneficiary can't have access to the funds while either you or the co-trustee are living.

3-The account does not pass through probate upon the trustee(s) death.

4-You can change the beneficiary at any time-a simple matter of going to the bank and filling out some paperwork.

5- POD accounts are federally insured by the Federal Deposit Insurance Corp(FDIC) separately from the trustee's individual accounts, up to $100,000 for each qualified beneficiary. This person has to be a spouse, child, sibling,parent, or grandchild of the trustee. If the beneficiary is not qualified, that is, they are someone other than one of these people, then the account is insured collectively with the owner's other shares accounts, (if there are any), up to $100,000.

What are some disadvantages of a Totten Trust?

1-A Treasury or brokerage account only allows one beneficiary-no alternates. A bank usually allows more than one. This is a less flexible arrangement than is found with the more formal, traditional trust.

2-You can't exclude your spouse and disinherit them by naming someone else as beneficiary on your account.

3-It's not a good idea to name a minor child as a beneficiary. If you die before they reach the age of majority, a court ordered person may be appointed as guardian.

4-Some states may have an estate tax, which needs to be paid, before the funds can be made available to the beneficiary. It's wise to check this before setting up this type of account.

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