In the context of nonprobate property, what is a Totten trust?

A Totten trust is specifically characterized as a bank deposit held in trust for another person. This type of trust allows an individual, known as the depositor, to establish an informal trust by putting money into a bank account or savings account with a designated beneficiary. Upon the depositor's death, the funds in the account are transferred directly to the named beneficiary, bypassing the probate process, which is a key feature that distinguishes Totten trusts from other forms of trusts.

This arrangement functions as a simple and effective estate planning tool because it enables the depositor to maintain control over the account during their lifetime, while also providing for a seamless transfer of the funds upon their death. The beneficiary does not hold any rights to the account until the depositor passes away, which safeguards the funds in the meantime.

In contrast, other choices describe different financial instruments or arrangements that do not capture the essence of a Totten trust. For example, a type of investment account does not inherently include the trust features necessary for a Totten trust, and an irrevocable trust managed by a trustee suggests a more formalized and complex structure than what a Totten trust entails. Finally, a trust that distributes assets before death does not represent the design of a Totten trust