As many Pennsylvania residents may know, trusts may be established to transfer assets to a beneficiary without going through probate. There are two main types of trust depending on whether the trust can be altered once it is formed. A bank account may be considered a Totten trust in that a beneficiary is identified, and the assets are marked to transfer to that person upon the depositor's death.
Revocable trusts, created by the grantor during his or her lifetime, may be changed at will by the trust creator. Property is transferred to the trust and placed in the trust's name. Unlike an irrevocable trust, property may be removed from the trust, and beneficiaries may be added or excluded. The grantor serves as the original trustee with another individual designated to assume trust administration once the trustmaker dies or is otherwise incapacitated. Upon the grantor's death, the revocable trust usually becomes essentially irrevocable, and no further changes may be made. Revocable trusts do not protect the assets placed in it from creditors. Creditors may find it more difficult to attach the assets.
A Totten trust allows the depositor to manage his or her account after the trust is established and may be revoked at any time. Totten trusts may be created by indicating in the account's title that it is payable upon death to the beneficiary or other appropriate language. A Totten trust avoids probate, is subject to creditors, does not include real property and is without a written trust agreement.
An attorney may provide insight into the type of trust that is best for each individual. Consulting with an attorney concerning the ways to provide an easy transfer of assets to beneficiaries may be useful when structuring such entities.
Source: Findlaw, "Types of Trusts", November 06, 2014