BILL ANALYSIS H.B. 422 By: Thompson 3-29-95 Committee Report (Unamended) BACKGROUND The Uniform Transfer on Death Security Registration Act was drafted by the National Conference of Commissioners on Uniform State Laws in 1989. Currently twenty states give the owners of investment securities to transfer title to these securities on adequate evidence of the owners death to a beneficiary outside of the decedent probate estate. This procedure allows such a transfer to a specified party without the problems of joint ownership. PURPOSE The purpose of this bill is to provide a mechanism to transfer securities on the death of the owner or owners by registration of beneficiary. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1 amends Chapter XI, Texas Probate Code, by adding Part 4 as follows: PART 4. UNIFORM TRANSFER ON DEATH SECURITY REGISTRATION ACT Sec. 469. Definitions: Beneficiary Form, Person, Register, Registering Entity, Security, Security Account, and State for the purposes of this chapter. Sec. 470. Registration in Beneficiary Form; Sole or Joint Tenancy Ownership. Provides that registration in beneficiary form may only be obtained for securities whose registration shows sole ownership by one individual or multiple ownership by two or more with right of survivorship, rather than as tenants in common. Further provides that multiple owners of a security registered in beneficiary form hold as joint tenants with right of survivorship, as joint tenants by the entities, or as owners of community property held in survivorship form, and not as tenants in common. Sec. 471. Registration in Beneficiary Form; Applicable Law. Provides that a security may be registered in beneficiary form if allowed by this part of the Probate Code or a similar law in an appropriate jurisdiction. Further provides that a registration governed by the law of a jurisdiction in which this uniform act or similar legislation is not or was not in effect is presumed to be valid and authorized as a matter of contract law. Sec. 472. Origination of Registration in Beneficiary Form. Provides that a security is registered in beneficiary form if the registration includes a designation of a beneficiary to take ownership at the death of the owner or all owners. Sec. 473. Form of Registration in Beneficiary Form, Provides that Registration in beneficiary may be shown by either the words "transfer on death" or "pay on death" or the abbreviations "TOD" or "POD" after the owner's name and before the beneficiary's name. Sec. 474. Effect of Registration in Beneficiary Form. Provides that the designation of a transfer on death beneficiary does not affect the ownership until the owner's death. Further provides that registration of a security in beneficiary form may be changed or cancelled at any time without the beneficiary's consent. Sec. 475. Ownership on Death of Owner. Provides that on the death of the sole owner or the last multiple owner that ownership of a security registered in beneficiary form passes to the beneficiary or beneficiaries on proof of the death of all owners and may be reregistered in the name of the beneficiaries. Further provides that until the division of the security multiple beneficiaries hold their interest as tenants in common. Also provides that if no beneficiaries survive the death of all owners that the security belongs to the estate of the deceased sole owner or the estate of the last to die of the multiple owners. Sec. 476. Protection of Registering Entity. Subsec. (a) provides that a registering entity is not required to offer or accept a request for registration in beneficiary form. Further provides that an owner requesting an offered registration in beneficiary form assents to the protections given to the registering entity by this Part of the Probate Code. Subsec. (b) provides that by accepting a request for registration of a security in beneficiary form, the registering entity agrees to implement the registration on the death of the owner. Subsec. (c) provides that a registering entity is discharged from all claims to a security by the estate, heirs, or devisees of the deceased owner if it registers a transfer of the security in good faith reliance on the registration, this part, and on sworn information provided by the representative of the deceased owner, the surviving beneficiary or the beneficiary's representative or on other information available to the entity. Further provides that the protections under this part do not extend to reregistration or payment made after the registering entity has received written notice from a claimant to an interest security objecting to implementation of the registration. Also provides that no other notice or other information available to the registering entity affects its right to protection under this part. Subsec. (d) provides that the protections provided by this part to the registering entity does not affect the rights of beneficiaries in disputes between themselves or other claimants to ownership of the security transferred or its value or proceeds. Sec. 477. Nontestamentary Transfer on Death. Subsec. (a) provides that a transfer on death resulting from a registration in beneficiary form is effective because of the contract between the owner and the registering entity and is not testamentary. Subsec. (b) provides that this part does not limit the rights of creditors of the owner against beneficiaries and other transferees under other laws of this state. Sec. 478. Terms, Conditions, and Forms for Registration. Subsec. (a) provides that a registering entity offering to accept registrations in beneficiary form may establish a variety of terms and conditions relating to registrations in compliance with this subsection. Subsec. (b) provides examples of forms to be used for registrations under this part. Sec. 479. Short Title: Rules of Construction. Subsec. (a) provides that this part may be cited as the Uniform Transfer on Death Security Registration Act. Subsec. (b) provides that this part shall be liberally construed and applied to promote its underlying purposes and policy and to make uniform the laws with respect to the subject of this part among states enacting it. Subsec. (c) provides that unless displaced by the particular provisions of this part, that the principles of law and equity supplement its provisions. Sec. 480. Application of Act. SECTION 2. Effective date. SECTION 3. Emergency clause. SUMMARY OF COMMITTEE ACTION Pursuant to a public notice posted March 8, 1995, in accordance with House rules, the Committee on Judicial Affairs met in a public hearing on March 14, 1995, to consider House Bill 422. The Chair, Rep. Hartnett, laid out H.B. 422 and recognized the author, Rep. Thompson, to explain the bill. The following witnesses testified for H.B. 422: Debra Perelman, representing the National Conference of Commissioners on Uniform State Laws, and Millard H. Ruud, representing the Texas Commission on Uniform State Laws. Alvin Golden, representing the Texas Academy of Probate Lawyers, testified against H.B. 422. There being no other witnesses, the Chair moved to leave H.B. 422 pending before the Committee; there was no objection. Pursuant to a public notice posted March 23, 1995, and to an announcement made on the House Floor while the House was still in session on March 29, 1995, the Committee on Judicial Affairs met in a formal meeting on March 29, 1995. H.B. 422 was pending before the committee. Rep. Goodman moved that H.B. 422 be reported favorably back to the full House, without amendment, with the recommendation that it do pass, be printed and sent to the Committee on Calendars. The motion prevailed by the following record vote: 7 ayes, 0 nays, 1 PNV, and 1 absent.