Process of Establishing a Totten Trust

• The process of setting up or establishing a Totten trust is relatively simple. All the prospective settlor has to do is to go to a bank, credit union or savings-and-loans to open the account. The settlor could also go to a brokerage firm because some of them offer this type of account, which they call a TOD (Transfer on Death) account. Even though the account cannot be used to transfer real estate, it can hold other things like U.S. treasury securities and U.S. savings bonds. Aside from naming beneficiaries, the settlor of a Totten trust could establish it for other reasons like for funeral expenses.
  
  

Disadvantage

• The main disadvantage of Totten trusts is that it is not recognized or honored in all the states in the United States. In such states, the contents of a Totten trust would be considered to be a part of the estate. The funds would pass through probate and would be distributed to the heirs of the deceased, according to the laws guiding the distribution of estate.
  
  

Advantage

• The main advantage of a Totten trust is the privacy that it affords the settlor. The privacy is such that the beneficiary of the Totten trust does not even know about it until the death of the settlor. Another advantage of the Totten trust is the fact that it is hassle-free and easy to set up. Also, the settlor could name a co-owner and the beneficiary will not get the funds until both the owner and co-owner pass away.