A Totten trust is a bank account in which the owner designates a beneficiary of the balance of the account (funds) that is payable on death (POD) of the account owner—also known as a POD account. POD accounts are widely used because they are an easy way to transfer assets at the death of the owner without going through probate proceedings—in other words, the beneficiary designation on the POD account makes the account a nonprobate asset, as it passes outside of probate.
The beneficiary designation made by a POD account owner is revocable and may be changed at any time before the death of the owner. The beneficiary designation confers no ownership interest in the account during the lifetime of the account owner.
The name Totten trust for what are now widely known as POD accounts came from a 1904 court case in New York in which the court approved the transfer of a bank account balance (through designation of a beneficiary) at the death of the owner. The court referred to the account with a beneficiary designation as a tentative trust—now known as a revocable trust.
In Texas, a Totten trust, commonly referred to as a Payable on Death (POD) account, is a convenient mechanism for nonprobate transfer of assets. The account owner can designate a beneficiary who will receive the funds in the account upon the owner's death, bypassing the probate process. This beneficiary designation is revocable, allowing the account owner to change the beneficiary at any time prior to their death without conferring any ownership interest to the beneficiary during the owner's lifetime. Texas law recognizes POD accounts as a simple estate planning tool to ensure assets are transferred directly to the intended beneficiary, and these accounts are governed by the Texas Estates Code. The use of POD accounts in Texas aligns with the principles established by the Totten trust case, providing a straightforward way to manage assets and avoid probate for those funds.
