A Totten Trust in Arizona

A Totten trust is a simplified way to leave a bank account in trust to a beneficiary. Arizona statutes require that a Totten trust be created by a written agreement. What exactly does the law require in terms of a writing? Can a bank account signature card constitute a sufficient written document to create a Totten trust in Arizona?

In Reidy v. Almich, 418 P. 2d 390 (1966) the Arizona Court of Appeals considered this issue.

Facts and Procedure

Mrs. Shepard died. One asset in her estate was a savings account at Pima Savings and Loan Association. The signature card in the account named Mrs. Shepard’s sister, C. Almich, as beneficiary.

Mrs. Shepard held the account in her own name until August 25, 1960. On that day, she signed a signature card reading:

  “Individual Trust Account No. 2020 (1) Shepard, Mrs. Shepard Trustee (To be typed) (Surname) (First Name) (Middle Name) (2) Almich, C. Almich Beneficiary I hereby apply for membership and a _______________ savings share account in the PIMA SAVINGS AND LOAN ASSOCIATION and for the issuance of evidence of membership. A specimen of my signature is shown below and the association is hereby authorized to act without further inquiry in accordance with writings bearing such signature. Signature /s/ Mrs. Shepard as Trustee Telephone Number Address 1137 E. Drachman As Trustee for C. Almich Beneficiary As specified in trust agreement on reverse side hereof. Dated 25 day of Aug , 1960.”

On the reverse side of the signature card was a form of “Trust Agreement,” which contained five numbered paragraphs. In paragraphs (1) and (2) the power to control the account and to revoke it at any time is retained by the “trustee.” There are no blanks in these paragraphs. Paragraphs (3) and (4) provide for the appointment of a “successor trustee” and for a continuation of the trust, “* * * subject to the right of revocation * * *” until the “beneficiary” reaches a certain age. These two paragraphs have unfilled blanks pertaining to the names of the successor trustees and the age of the beneficiary. Paragraph (5), absolving the savings and loan association from liability in honoring the signature of the “trustee,” has no unfilled blanks. A space for a date and the signature of the “grantor” were left in blank at the bottom of the form.

The employee who worked with Mrs. Shepard on this testified. She said the transaction was handled in the customary way to change an account into a trust account with a beneficiary. This employee testified that it was not customary for the reverse side of the signature card to be completed. She said that her superiors did not think it necessary.

At the time of Mrs. Shepard’s death, there was around $10,000 in the account. Another of Mrs. Shepard’s sisters testified that Mrs. Shepard had told her that she put away ten thousand dollars for C. Almich. There was no evidence of any intent on Mrs. Shepard’s part to establish a trust for C. Almich.

The Savings and Loan brought an action against the executor of Mrs. Shepard’s estate and C. Almich to adjudicate ownership of the account. C. Almich moved for summary judgment which the court granted. The Savings and Loan did not object and has taken no appeal from the judgment below. The executor of the estate brought this appeal.

Totten Trust Requires A Written Agreement

The executor argues on appeal that the signature card is not sufficient to satisfy the requirement of A.R.S. section 6-431 that there be a “written agreement.” A.R.S. section 6-431, subsec. B, provides:

“B. If one or more persons opening or holding an account shall execute a written agreement with the association providing that the account shall be held in the name of such person or persons as trustees for one or more persons designated as beneficiaries, the account and any balance thereof which exists from time to time shall be held as a trust account… and …upon the death of the last surviving trustee the person or persons designated as beneficiaries who are living at the death of the last surviving trustee shall be the holders of the account …”

This provides for a “Totten” trust, a device used to pass the property in a bank account after the depositor’s death to a designated person. The property passes through a trust rather than through probate. The Arizona legislature has given its approval to this trust by adopting the statute.

Mrs. Shepard’s Intent Controls

The Court found that if the card in question was signed by Mrs. Shepard with the intent of creating a tentative trust, the statute in question was satisfied. No particular form for the “written agreement” is set out in the statute. The Court held that any written agreement that identifies the account, designates the beneficiary and specifies that the depositor is a trustee for the beneficiary, is sufficient.

The executor claims that when a fact involves a state of mind, the matter may not be disposed of upon a motion for summary judgment. The Court agreed that the summary judgment procedure should be sparingly used when a vital issue concerns a state of mind. However, it said that here, the state of mind involved is not that of a litigant. The state of mind at issue is that of the decedent, Mrs. Shepard at the time she signed the signature card.

As far as the savings and loan association was concerned, this was a routine transaction. The teller testified that she handled the transaction in the usual course of business of the savings and loan association. This signature card would be used if a customer said: “I want to be able to use this account until I die and then I want it to go to somebody else.”

When the facts pertaining to a state of mind are as clear as in this case, the Court of Appeals held that the trial court is justified in granting summary judgment.

Disposition

The Court affirmed the judgment of the lower court.

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