What is a Totten trust primarily used for?

A Totten trust, often referred to as a "payable-on-death" account, is primarily used to avoid probate. This type of trust allows the grantor to maintain control over the assets during their lifetime while designating a beneficiary who will receive the assets directly upon the grantor's death. By using a Totten trust, the assets bypass the probate process, which can be time-consuming and costly.

When the grantor passes away, the primary benefit is that the designated beneficiary can access the funds immediately without the need for a court proceeding. This is particularly advantageous as it allows for a quick transfer of assets to the beneficiary and ensures that the assets are not subject to the claims of the grantor’s creditors in the same way that properties in a probate estate might be.

In contrast, while a Totten trust does provide some helpful means of managing assets, its specific design is aimed at allowing assets to transfer upon death, making it distinct from other planning tools intended for purposes like tax minimization, transfers during life, or asset management for minors.