Search Articles

Find Attorneys

Totten Trust Can Protect Your Money for Your Loved Ones

  • November 14th, 2022

Grandfather Carries Grandson On Shoulders During Walk In Park.Totten trusts, or payable-on-death bank accounts, are an estate planning tool that allows you to transfer money to a chosen person upon your death. When you make a Totten trust, you put funds into a revocable trust and designate a beneficiary to receive them.

As the individual who made the account, you are the acting trustee. The beneficiary is the person you have selected to receive the funds when you die. As trustee, you manage the funds for the benefit of this person.

Local Elder Law Attorneys in Your City

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Unlike irrevocable trusts, which transfer ownership to another party, revocable trusts allow the account holder to maintain control over the account's contents. When you make a Totten trust, your designated beneficiary cannot get the money while you are alive. The money remains yours and is not an asset of the beneficiary, which can protect the money for your loved one if your loved one gets divorced or is pursued by creditors. Like a typical bank account, a Totten trust is subject to your creditors while you are alive.

Since the trust is revocable, you can access the funds in the account, allowing you to use the money if needed. If, for instance, an emergency happens and you need to withdraw the contents of the account, you will be able to do so.

When you select who will obtain the contents of your account, you may name multiple people. Unlike a will, you cannot specify how much goes to each person. In instances with multiple beneficiaries, banks typically split funds evenly.

Benefits of Totten Trusts

When you draft a will, you decide who will receive your possessions when you die. For your beneficiaries to acquire the money and assets you left them, in many cases, your estate must go through probate, which the court oversees. During the probate process, an individual dissatisfied with the terms of your will can challenge it, creating a lengthy and costly ordeal for your family and friends.

A key advantage to using a Totten trust is that it bypasses probate. The funds in the trust pass to the person you select to be your beneficiary immediately upon your death, without court oversight.

Since the trust does not go through probate, your creditors cannot bring claims against it following your death. If you pass funds to an individual through a will, creditors can bring claims against your estate during probate, which could reduce the amount of money your loved one secures at the end of the process. The contents of a Totten trust are also not subject to the gift tax.

Unlike irrevocable trusts, Totten trusts offer flexibility. In addition to taking money from your account, you can change the beneficiary. Suppose your first beneficiary passes away prematurely, or you have a fundamental disagreement and wish to select another person to give your funds. You can change the beneficiary on the trust for any reason.

How to Create a Totten Trust

Setting up a Totten trust entails contacting your financial institution and designating a beneficiary on your account. The bank will need to have the name of your chosen inheritor on file. After you pass away, your beneficiary will need evidence of your death, such as a death certificate, as well as personal identification, to claim the account.

Contact an estate planning attorney to learn more about how a Totten trust or payable-on-death account can fit into your overall legacy plan.


Last Modified: 11/14/2022
Learn the secrets of estate planning from an expert
ADVERTISEMENT
Medicaid 101
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
Medicaid Planning Strategies

Careful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.

READ MORE
Estate Recovery: Can Medicaid Take My House After I’m Gone?

If steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.

READ MORE
Help Qualifying and Paying for Medicaid, Or Avoiding Nursing Home Care

There are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.

READ MORE
Are Adult Children Responsible for Their Parents’ Care?

Most states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.

READ MORE
Applying for Medicaid

Applying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.

READ MORE
Alternatives to Medicaid

Medicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.

READ MORE
ElderLaw 101
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Long-Term Care Insurance

Understand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.

READ MORE
Medicare

Learn who qualifies for Medicare, what the program covers, all about Medicare Advantage, and how to supplement Medicare’s coverage.

READ MORE
Retirement Planning

We explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.

READ MORE
Senior Living

Find out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.

READ MORE
Social Security

Get a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.

READ MORE
Special Needs Planning

Learn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.

READ MORE
Veterans Benefits

Explore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.

READ MORE