Totten Trust

An arrangement created by a person depositing his or her own money in his or her own name in a bank account for the benefit of another.

A Totten trust is a tentative trust, revocable at will, until the depositor dies or completes the gift in his or her lifetime by some unequivocal act or declaration, such as delivery of the pass-book or notice to the beneficiary. If the depositor dies before the beneficiary without revocation or some resolute act or declaration of disaffirmance, the presumption arises that an absolute trust was created as to the balance on hand at the death of the depositor.

The beneficiary need not know about the arrangement, and the depositor is entitled to deposit and withdraw funds from the account as he or she deems fit. The depositor can even close out or revoke the account without obtaining the beneficiary's permission. When the depositor dies, any funds in the account automatically become the property of the beneficiary, but they might be subject to the claims of the decedent's creditors. Totten trusts are usually established to avoid the inconvenience of making a will and the expense and delay of probate and administration. Such an arrangement is known as a testamentary substitute, since a will is thereby obviated. Frequently such trusts are established because the depositor wants to conceal his or her financial situation from others.