What result is there for the residence in a Totten trust if the grantor survives the trust term?

In a Totten trust, also known as a payable-on-death account or informal trust, the grantor retains control over the assets in the trust during their lifetime. If the grantor survives the trust term, the residence or assets held in the Totten trust do not directly transfer to the named beneficiaries until the grantor's death. As a result, these assets remain part of the grantor's estate for estate tax purposes, but not in a way that they are excluded from the gross estate.

The correct understanding is that the assets in a Totten trust are included in the grantor's gross estate, which is significant for estate tax calculations, but they avoid the probate process upon the grantor’s passing. Beneficiaries typically receive the assets directly, bypassing the need for probate, provided the grantor has not made any modifications to the trust during their lifetime.

Therefore, the residence in a Totten trust remains part of the grantor's estate, affirming that it is not excluded and subject to consideration for taxes and distribution upon the grantor's passing.