A ‘TOTTEN’ trust is a savings account trust established by a person for his son or daughter. To illustrate, you have a 1- year old son. You decide to open a savings account in your name “in trust for your son”. Every month you deposit $500 into the account. After 2 years, the account has a balance of $12,000. Then, you decide to file for Chapter 7 bankruptcy relief to wipe out $50,000 of credit card debt. Is the $12,000 that you have set aside for your son an asset of your bankruptcy estate? Now, let’s imagine a different situation. Your father asked you to open a savings account in his name and your name, jointly. He said that he was going to deposit $200,000 in the account. He told you that you should use the $200,000 to buy a condominium in your mother’s name and his name. What is the correct treatment of these two accounts in your bankruptcy? In other words, can the bankruptcy trustee ask you to transfer both accounts to him for the benefit of your creditors?

Let's discuss the ‘TOTTEN’ trust first. In Re Moise, the Chapter 7 debtors claimed a savings account denominated ‘Kesnel Moise Bianca Adrien Trustees for Kaleb Joseph Adrien.’ Kaleb was the son of debtors. The account was opened in 2004. No independent trust documents or agreements setting forth the terms of any trust established by the debtors for their son were introduced into evidence or alleged to exist. The debtors said there was $11,272.13 in the account when they filed for bankruptcy. They claimed this amount as exempt pursuant to Section 522(d)(5) which provides that debtor may exempt “the debtor’s aggregate interest in any property, not to exceed in value $1,075, plus up to $10,124 of any unused amount of the exemption provided under paragraph (1) of this subsection.” Paragraph (1) refers to the homestead exemption up to $20,200 in value. So, debtors considered the savings account for their son as their money but they exempted the account. But trustees being what they are, objected that the account was a trust account for their son's benefit, and that all or substantially all the funds in the account were deposited within four years of the bankruptcy filing when the debtors were insolvent. The trustee asserted that he could avoid the transfers, and once recovered, the debtors could not claim the money as exempt pursuant to Section 522(g). In layman terms, the trustee said that the deposits were transfers of monies that he as trustee could avoid or annul. And once the court annuls the transfers of monies, he can get the money and there’ nothing that debtors can do about it, like stealing food from a baby.