What is a Totten’s Trust (or Poor Man’s Trust)?

A Totten’s Trust (also called a “poor man’s trust”) is essentially the same thing as a Pay on Death (“POD”) bank account.  (The name “Totten’s Trust” is taken from a 1904 New York case involving a person with this name.)  Using a POD account, a person was able to place proceeds into an account, and, upon the person’s death, the proceeds would pass outside of probate to the named account designee.

Before a ruling by the court permitting this type of mechanism for transferring assets, it was unclear whether such practice would be permissible, as such account did not comply with either trust law or the requirements of a valid will.  Courts have now recognized this transfer method as valid.

Modern Day – Revocable Trusts

Today, revocable trusts often are used to replace Totten Trusts/ POD accounts.  In some respects, revocable trusts and Totten Trusts/POD accounts share similar characteristics; namely that there is no “guaranteed” amount that will be made available to potential beneficiaries, and that the assets can be removed at any time.

In some instances, such as if only money is involved and there is only one person that will inherit such money, POD accounts may still be useful.  In many cases, however, the assets, beneficiaries, and estate distribution desires are more complex, in which an revocable trust is more beneficial.

The Benefits of Revocable Trusts over POD Accounts.

For example, a person may have many types of non-money assets, like stocks or real estate.  There may be many beneficiaries, and the maker of the trust (called the “grantor”) may wish for different beneficiaries, or classes of beneficiaries, to receive different amounts.  The intended beneficiaries may also be minors at the time of the grantor’s death, and the grantor may wish to postpone an inheritance until beneficiaries are older.

Unlike a POD account, which states that all money therein must be paid upon death, a revocable trust is usually the perfect instrument to take into account all of these matters mentioned above, as it has the flexibility to provide for a wide range of options.

What Type of Arrangement is the Best for You?

When we meet with you and understand the nature of your estate, your intended beneficiaries, and your objectives, we can advise you as to the specific legal instruments that will work the best to achieve your goals.

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