By: Harris S.B. No. 504 A BILL TO BE ENTITLED AN ACT 1-1 relating to the adoption of the Uniform Transfer on Death Security 1-2 Registration Act. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Chapter XI, Texas Probate Code, is amended by 1-5 adding Part 4 to read as follows: 1-6 PART 4. UNIFORM TRANSFER ON DEATH SECURITY 1-7 REGISTRATION ACT 1-8 Sec. 466. DEFINITIONS. In this part: 1-9 (1) "Beneficiary form" means a registration of a 1-10 security that indicates the present owner of the security and the 1-11 intention of the owner regarding the person who will become the 1-12 owner of the security on the death of the owner. 1-13 (2) "Person" includes a corporation, organization, 1-14 government or governmental subdivision or agency, business trust, 1-15 estate, trust, partnership, association, and any other legal 1-16 entity. 1-17 (3) "Register," including its derivatives, means to 1-18 issue a certificate showing the ownership of a certificated 1-19 security or, in the case of an uncertificated security, to initiate 1-20 or transfer an account showing ownership of securities. 1-21 (4) "Registering entity" means a person who originates 1-22 or transfers a security title by registration and includes a broker 1-23 maintaining security accounts for customers and a transfer agent or 2-1 other person acting for or as an issuer of securities. 2-2 (5) "Security" means a share, participation, or other 2-3 interest in property, in a business, or in an obligation of an 2-4 enterprise or other issuer and includes a certificated security, an 2-5 uncertificated security, and a security account. 2-6 (6) "Security account" means: 2-7 (A) a reinvestment account associated with a 2-8 security, a securities account with a broker, a cash balance in a 2-9 brokerage account, cash, interest, earnings, or dividends earned or 2-10 declared on a security in an account, a reinvestment account, or a 2-11 brokerage account, whether or not credited to the account before 2-12 the owner's death; or 2-13 (B) a cash balance or other property held for or 2-14 due to the owner of a security as a replacement for or product of 2-15 an account security, whether or not credited to the account before 2-16 the owner's death. 2-17 (7) "State," when referring to a part of the United 2-18 States, includes any state, district, commonwealth, territory, and 2-19 insular possession of the United States and any area subject to the 2-20 legislative authority of the United States of America. 2-21 Sec. 467. REGISTRATION IN BENEFICIARY FORM; SOLE OR JOINT 2-22 TENANCY OWNERSHIP. Only an individual whose registration of a 2-23 security shows sole ownership by one individual or multiple 2-24 ownership by two or more with right of survivorship, rather than as 2-25 tenants in common, may obtain registration in beneficiary form. 3-1 Multiple owners of a security registered in beneficiary form hold 3-2 as joint tenants with right of survivorship, as tenants by the 3-3 entireties, or as owners of community property held in survivorship 3-4 form, and not as tenants in common. 3-5 Sec. 468. REGISTRATION IN BENEFICIARY FORM; APPLICABLE LAW. 3-6 A security may be registered in beneficiary form if the form is 3-7 authorized by this part or a similar statute of the state of 3-8 organization of the issuer or registering entity, the location of 3-9 the registering entity's principal office, the office of its 3-10 transfer agent, or its office making the registration, or by this 3-11 uniform act or a similar statute of the law of the state listed as 3-12 the owner's address at the time of registration. A registration 3-13 governed by the law of a jurisdiction in which this uniform act or 3-14 similar legislation is not in force or was not in force when a 3-15 registration in beneficiary form was made is nevertheless presumed 3-16 to be valid and authorized as a matter of contract law. 3-17 Sec. 469. ORIGINATION OF REGISTRATION IN BENEFICIARY FORM. 3-18 A security, whether evidenced by certificate or account, is 3-19 registered in beneficiary form if the registration includes a 3-20 designation of a beneficiary to take the ownership at the death of 3-21 the owner or the deaths of all multiple owners. 3-22 Sec. 470. FORM OF REGISTRATION IN BENEFICIARY FORM. 3-23 Registration in beneficiary form may be shown by the words 3-24 "transfer on death" or the abbreviation "TOD" or by the words "pay 3-25 on death" or the abbreviation "POD," after the name of the 4-1 registered owner and before the name of a beneficiary. 4-2 Sec. 471. EFFECT OF REGISTRATION IN BENEFICIARY FORM. The 4-3 designation of a TOD beneficiary on a registration in beneficiary 4-4 form does not affect ownership until the owner's death. A 4-5 registration of a security in beneficiary form may be canceled or 4-6 changed at any time by the sole owner or all then surviving owners, 4-7 without the consent of the beneficiary. 4-8 Sec. 472. OWNERSHIP ON DEATH OF OWNER. On death of a sole 4-9 owner or the last to die of multiple owners, ownership of a 4-10 security registered in beneficiary form passes to the beneficiary 4-11 or beneficiaries who survive all owners. On proof of death of all 4-12 owners and compliance with any applicable requirements of the 4-13 registering entity, a security registered in beneficiary form may 4-14 be reregistered in the name of the beneficiary or beneficiaries who 4-15 survive the death of all owners. Until division of the security 4-16 after the death of all owners, multiple beneficiaries surviving the 4-17 death of all owners hold their interests as tenants in common. If 4-18 no beneficiary survives the death of all owners, the security 4-19 belongs to the estate of the deceased sole owner or the estate of 4-20 the last to die of multiple owners. 4-21 Sec. 473. PROTECTION OF REGISTERING ENTITY. (a) A 4-22 registering entity is not required to offer or to accept a request 4-23 for security registration in beneficiary form. If a registration 4-24 in beneficiary form is offered by a registering entity, the owner 4-25 requesting registration in beneficiary form assents to the 5-1 protections given to the registering entity by this part. 5-2 (b) By accepting a request for registration of a security in 5-3 beneficiary form, the registering entity agrees that the 5-4 registration will be implemented on the death of the deceased owner 5-5 as provided by this part. 5-6 (c) A registering entity is discharged from all claims to a 5-7 security by the estate, creditors, heirs, or devisees of the 5-8 deceased owner if it registers a transfer of a security in 5-9 accordance with Section 472 of this code and does so in good faith 5-10 reliance on the registration, on this part, and on information 5-11 provided to it by affidavit of the personal representative of the 5-12 deceased owner, or by the surviving beneficiary or by the surviving 5-13 beneficiary's representatives, or other information available to 5-14 the registering entity. The protections of this part do not extend 5-15 to a reregistration or payment made after a registering entity has 5-16 received written notice from a claimant to an interest in the 5-17 security objecting to implementation of a registration in 5-18 beneficiary form. No other notice or other information available 5-19 to the registering entity affects its right to protection under 5-20 this part. 5-21 (d) The protection provided by this part to the registering 5-22 entity of a security does not affect the rights of beneficiaries in 5-23 disputes between themselves and other claimants to ownership of the 5-24 security transferred or its value or proceeds. 5-25 Sec. 474. NONTESTAMENTARY TRANSFER ON DEATH. (a) A 6-1 transfer on death resulting from a registration in beneficiary form 6-2 is effective by reason of the contract regarding the registration 6-3 between the owner and the registering entity and this part and is 6-4 not testamentary. 6-5 (b) This part does not limit the rights of creditors of 6-6 security owners against beneficiaries and other transferees under 6-7 other laws of this state. 6-8 Sec. 475. RIGHTS OF CREDITOR ON REGISTRATION. (a) A 6-9 security registered in beneficiary form is not effective against an 6-10 estate of a deceased party to transfer to a survivor sums that are 6-11 otherwise needed to pay debts, taxes, and expenses of 6-12 administration, including statutory allowances to the surviving 6-13 spouse and minor children, if other assets of the estate are 6-14 insufficient. 6-15 (b) A party, POD or TOD payee, or beneficiary who receives a 6-16 payment from or transfer of a security registered in beneficiary 6-17 form after the death of a deceased party is liable to account to 6-18 the deceased party's personal representative for amounts the 6-19 decedent owned beneficially immediately before the decedent's death 6-20 to the extent necessary to discharge the claims and charges 6-21 described by Subsection (a) of this section remaining unpaid after 6-22 application of the decedent's estate, but is not liable in an 6-23 amount greater than the amount that the party, POD or TOD payee, or 6-24 beneficiary received from the security. 6-25 (c) A proceeding to assert the liability provided by 7-1 Subsection (b) of this section may not be commenced unless the 7-2 personal representative has received a written demand by a 7-3 surviving spouse, a creditor, or one acting for a minor child of 7-4 the decedent, and a proceeding may not be commenced later than two 7-5 years after the date of the death of the decedent. Sums recovered 7-6 by the personal representative under this section shall be 7-7 administered as part of the decedent's estate. 7-8 (d) This section does not affect the right of a financial 7-9 institution, a securities issuer, or a securities broker to make a 7-10 payment from or transfer of a security registered in beneficiary 7-11 form according to the terms of the security or impose liability on 7-12 the institution, issuer, or broker to the estate of a deceased 7-13 party unless before the payment or transfer the institution, 7-14 issuer, or broker received written notice from the personal 7-15 representative stating the sums needed to pay debts, taxes, and 7-16 expenses of administration. 7-17 Sec. 476. TERMS, CONDITIONS, AND FORMS FOR REGISTRATION. 7-18 (a) A registering entity offering to accept registrations in 7-19 beneficiary form may establish the terms and conditions under which 7-20 it will receive requests for registration in beneficiary form and 7-21 for implementation of registrations in beneficiary form, including 7-22 requests for cancellation of previously registered TOD beneficiary 7-23 designations and requests for reregistration to effect a change of 7-24 beneficiary. The terms and conditions may provide for proving 7-25 death, avoiding or resolving a problem concerning fractional 8-1 shares, designating primary and contingent beneficiaries, and 8-2 substituting a named beneficiary's descendants to take in the place 8-3 of the named beneficiary in the event of the beneficiary's death. 8-4 Substitution may be indicated by appending to the name of the 8-5 primary beneficiary the letters "LDPS," standing for "lineal 8-6 descendants per stirpes." This designation substitutes a deceased 8-7 beneficiary's descendants who survive the owner for a beneficiary 8-8 who fails to survive the owner, the descendants to be identified 8-9 and to share in accordance with the law of the beneficiary's 8-10 domicile at the owner's death governing inheritance by descendants 8-11 of an intestate. Other forms of identifying beneficiaries who are 8-12 to take on one or more contingencies and rules for providing proofs 8-13 and assurances needed to satisfy reasonable concerns by registering 8-14 entities regarding conditions and identities relevant to accurate 8-15 implementation of registrations in beneficiary form may be 8-16 contained in a registering entity's terms and conditions. 8-17 (b) The following are illustrations of registrations in 8-18 beneficiary form that a registering entity may authorize: 8-19 (1) Sole owner--sole beneficiary: John S Brown TOD 8-20 (or POD) John S Brown Jr. 8-21 (2) Multiple owners--sole beneficiary: John S Brown 8-22 Mary B Brown JT TEN TOD John S Brown Jr. 8-23 (3) Multiple owners--primary and secondary 8-24 (substituted) beneficiaries: John S Brown Mary B Brown, JT TEN TOD 8-25 John S Brown Jr SUB BENE Peter Q Brown or John S Brown Mary B Brown 9-1 JT TEN TOD John S Brown Jr LDPS. 9-2 Sec. 477. NOTICE OF EFFECT OF REGISTRATION. A registering 9-3 entity shall provide to an owner requesting registration of a 9-4 security in beneficiary form a written statement describing the 9-5 legal effects of the registration not later than the date on which 9-6 the owner registers the security. The statement is sufficient if 9-7 it is the same as or substantially similar to the following: 9-8 "On proof of death, your security in beneficiary form will be 9-9 transferred to your named beneficiary or beneficiaries without 9-10 being part of your estate under your will or by intestacy. You 9-11 should make sure before you register your security in beneficiary 9-12 form that the registration does not conflict with any other 9-13 provision in a document that you have authorized and signed, 9-14 including a will or trust agreement. If you have any doubt about 9-15 whether a conflict exists, you should seek the advice of a 9-16 professional in the field of estate planning. You should also note 9-17 that registering your security in beneficiary form may not affect a 9-18 creditor's claim against your estate or affect the estate or 9-19 inheritance tax liability of your estate or of your beneficiary or 9-20 beneficiaries." 9-21 Sec. 478. EFFECT OF CERTAIN SECURITY ACCOUNT ON COMMUNITY 9-22 PROPERTY INTEREST. A security account created with community 9-23 property funds is subject to Section 15, Article XVI, Texas 9-24 Constitution, and does not alter community property rights in any 9-25 form or manner, regardless of whether the security account has been 10-1 registered in beneficiary form. 10-2 Sec. 479. SHORT TITLE: RULES OF CONSTRUCTION. (a) This 10-3 part may be cited as the Uniform Transfer on Death Security 10-4 Registration Act. 10-5 (b) This part shall be liberally construed and applied to 10-6 promote its underlying purposes and policy and to make uniform the 10-7 laws with respect to the subject of this part among states enacting 10-8 it. 10-9 (c) Unless displaced by the particular provisions of this 10-10 part, the principles of law and equity supplement its provisions. 10-11 Sec. 480. APPLICATION OF ACT. This part applies to 10-12 registrations of securities in beneficiary form made before, on, or 10-13 after September 1, 1997, by decedents dying on or after September 10-14 1, 1997. 10-15 SECTION 2. This Act takes effect September 1, 1997. 10-16 SECTION 3. The importance of this legislation and the 10-17 crowded condition of the calendars in both houses create an 10-18 emergency and an imperative public necessity that the 10-19 constitutional rule requiring bills to be read on three several 10-20 days in each house be suspended, and this rule is hereby suspended. 10-21 COMMITTEE AMENDMENT NO. 1 10-22 Amend S.B. No. 504, in SECTION 1 of the bill, by striking 10-23 added Section 477, Texas Probate Code (introduced version, page 8, 10-24 lines 15-27, and page 9, lines 1-6), and substituting the 10-25 following: 11-1 Sec. 477. NOTICE OF EFFECT OF REGISTRATION. A registering 11-2 entity shall provide to an owner requesting registration of a 11-3 security in beneficiary form a written statement describing the 11-4 legal effects of the registration not later than the date on which 11-5 the owner registers the security. The statement shall be printed 11-6 in all capital 12-point boldfaced type and shall be signed by the 11-7 registering owner at the time of registration. The following 11-8 statement is sufficient if signed by the registering owner: 11-9 "IMPORTANT NOTICE REGARDING YOUR RIGHTS 11-10 "On proof of death, your security in beneficiary form will be 11-11 transferred to your named beneficiary or beneficiaries without 11-12 being part of your estate under your will or by intestacy. You 11-13 should make sure before you register your security in beneficiary 11-14 form that the registration does not conflict with any other 11-15 provision in a document that you have authorized and signed, 11-16 including a will or trust agreement. If you have any doubt about 11-17 whether a conflict exists, you should seek the advice of a 11-18 professional in the field of estate planning. You should also note 11-19 that registering your security in beneficiary form may not affect a 11-20 creditor's claim against your estate or affect the estate or 11-21 inheritance tax liability of your estate or of your beneficiary or 11-22 beneficiaries. 11-23 "I HAVE READ THE ABOVE NOTICE AND UNDERSTAND ITS CONTENTS. 11-24 _________________________________(signature of registering owner)" 11-25 75R10280 CLG-D Hartnett