Totten Trusts and your divorce

A Totten trust is basically a bank savings account that has an “in trust for” provision. A spouse can obviously have a bank account in trust for his or her spouse. It’s a kind of pay on death feature, if you know what I mean. So upon the death of the spouse, the one for whom the Totten trust was made out would get the money.

So, what happens if you get divorced and there is a Totten trust/POD account. Is that marital property? Or will the beneficiary spouse still remain the beneficiary after a divorce? That is a very good question. Some trusts are revocable and others are irrevocable. I can tell you that as a general rule the beneficiary of a POD account has no right to the cash while the “depositor” is still kicking. So only death would get you those assets even if you are the spouse and you’re getting divorced. Don’t quote me on this one. But that would be my interpretation. The Uniform Probate Code says that the beneficiary has no right to the cash on a POD account while the depositor is alive. I did not see an exception for spouses or former spouses. So my conclusion is that if you are the spouse who is the beneficiary of a POD account, even if you get divorced, you can’t get the money. But the law can be counterintuitive. So don’t quote me on this.

Also,  there are slight technical differences between a Totten Trust and a POD account. With a Totten trust, the beneficiary can be changed at will of the depositor so in the case of a divorce, the spouse can simply take the ex off the account as the beneficiary, and if it is marital property the proceeds can be divvied, or they can do an offset for another asset. (btw, in some situations the Totten trust has been abolished altogether.)  But a Pay on Death account cannot be so easily changed. It cannot be changed at will according to the Uniform Probate Code. So, if you are getting divorced, I guess it would matter whether the account is classified as a Totten trust or as a Pay on Death account. With the former, the beneficiary can simply be changed. With the latter, it is not so clear what the law is. It depends on the kind of POD that it is, I guess, whether a “joint account” with right of survivorship, versus an “agency account” versus a straight POD account.  This might be a time to call in the Trusts and Estates big wigs and get their take on how that would work.

But see In Re Totten, 179 NY 112, 71 NE 748 (1904) where the court interpreted a totten trust as a POD revocable trust. So, as I said, the law is somewhat murky on this issue and you need the big wigs since this is not my area.

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