Differences Between a Totten Trust & a Payable-on-Death Account

Totten Trusts and payable-on-death accounts are essentially the same thing. They are both informal revocable trusts that are created by an account owner when he signs a bank form establishing the revocable trust. This form gives instructions to the bank on how to distribute and transfer the contents of the account at the time of the account holder’s death.


Both Totten Trusts and payable-on-death accounts are informal revocable trusts that provide banks with instructions on how to distribute account assets when the account holder passes away.

The Background of Totten Trusts

Payable-on-death accounts are also called Totten Trusts as a result of a 1904 court decision in New York state. The court ruling allowed a person to open a bank account and name himself as a trustee for a beneficiary – someone who had no access or control of the money until the account owner’s death.

Previously, this type of arrangement wasn’t allowed, with courts ruling that this was sidestepping a will. The court in the Totten case skated around the issue by calling such an account a “tentative trust.” As more states allowed the use of a Totten Trust, legislatures enacted laws regulating the accounts and began referring to them as payable-on-death accounts.

Setting Up a Trust

It is easy to set up a Totten Trust or payable-on-death account. You establish a new account at your bank, titling the account in specific language, such as “payable on death to," “in trust for," or “as trustee for," depending upon your bank’s requirements. You name the beneficiary or beneficiaries and make your deposit to the account. For example, the account may be titled “John Doe in trust for Jane Doe.” This allows you, John, to make any type of transactions with the account, but Jane cannot do anything with the account or the money until you die.

Benefits of These Trusts

There are several benefits to this type of account. It is very easy to set up and it is very easy to change. For instance, if your named beneficiary dies before you, it is simple to change the beneficiary name to someone else. This type of account gives you total control. The money in the account will go directly to the person or people you name without going through probate. There will be no effect on the account by the terms of your will.

Exploring Revocation Privileges

Because this is considered a revocable trust, you can end it and any time. You can withdraw all of the money and leave the account empty. You can establish a new account with a new beneficiary. You can easily revoke the trust by visiting your bank and making the request in writing, which may need to be notarized.