There are so many varieties of trusts that it's difficult to keep track of them all. These trusts can also drafted in a number of ways, which makes it tricky to know exactly what to do for an inexperienced trust planning attorney, and especially for a layperson who doesn't have any legal training. A Totten trust, for example, is a type of legal document that many people have never heard of.
Totten trusts are created while the estate planner is still alive. All the planner needs to do is to deposit money into a designated bank account in his or her name. These revocable trusts do not complete the actual gift to the trust beneficiary until the grantor passes away. Any person, business, charity or other legal entity can serve as the beneficiary of the trust.
Totten trusts are most popularly used in association with securities accounts at brokerage firms and savings accounts at banks. Many estate planners will also tie a Totten trust to a certificate of deposit or a piece of real estate property. A Totten trust will usually use language that says "payable on death," "in trust for," or "as trustee for" and these may be identified more quickly with the following shorthand, "IFF," "POD," and "ATF."
These trusts are very simple to create and set up and they provide more security -- compared to joint ownership -- when someone wants to transfer wealth to a beneficiary without the need for probate. Because they're so easy and inexpensive to create, many refer to Totten trusts as "poor man" trusts.
If you are considering a Totten trust and want to review all of your trust-planning options, our website is an excellent place to start.