By Harris S.B. No. 504 75R2493 CLG-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the adoption of the Uniform Transfer On Death Security 1-3 Registration Act. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter XI, Texas Probate Code, is amended by 1-6 adding Part 4 to read as follows: 1-7 PART 4. UNIFORM TRANSFER ON DEATH SECURITY 1-8 REGISTRATION ACT 1-9 Sec. 466. DEFINITIONS. In this part: 1-10 (1) "Beneficiary form" means a registration of a 1-11 security that indicates the present owner of the security and the 1-12 intention of the owner regarding the person who will become the 1-13 owner of the security on the death of the owner. 1-14 (2) "Person" includes a corporation, organization, 1-15 government or governmental subdivision or agency, business trust, 1-16 estate, trust, partnership, association, and any other legal 1-17 entity. 1-18 (3) "Register," including its derivatives, means to 1-19 issue a certificate showing the ownership of a certificated 1-20 security or, in the case of an uncertificated security, to initiate 1-21 or transfer an account showing ownership of securities. 1-22 (4) "Registering entity" means a person who originates 1-23 or transfers a security title by registration, and includes a 1-24 broker maintaining security accounts for customers and a transfer 2-1 agent or 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, 2-5 an 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. 2-26 Multiple owners of a security registered in beneficiary form hold 2-27 as joint tenants with right of survivorship, as tenants by the 3-1 entireties, or as owners of community property held in survivorship 3-2 form, and not as tenants in common. 3-3 Sec. 468. REGISTRATION IN BENEFICIARY FORM; APPLICABLE LAW. 3-4 A security may be registered in beneficiary form if the form is 3-5 authorized by this part or a similar statute of the state of 3-6 organization of the issuer or registering entity, the location of 3-7 the registering entity's principal office, the office of its 3-8 transfer agent, or its office making the registration, or by this 3-9 uniform act or a similar statute of the law of the state listed as 3-10 the owner's address at the time of registration. A registration 3-11 governed by the law of a jurisdiction in which this uniform act or 3-12 similar legislation is not in force or was not in force when a 3-13 registration in beneficiary form was made is nevertheless presumed 3-14 to be valid and authorized as a matter of contract law. 3-15 Sec. 469. ORIGINATION OF REGISTRATION IN BENEFICIARY FORM. 3-16 A security, whether evidenced by certificate or account, is 3-17 registered in beneficiary form if the registration includes a 3-18 designation of a beneficiary to take the ownership at the death of 3-19 the owner or the deaths of all multiple owners. 3-20 Sec. 470. FORM OF REGISTRATION IN BENEFICIARY FORM. 3-21 Registration in beneficiary form may be shown by the words 3-22 "transfer on death" or the abbreviation "TOD" or by the words "pay 3-23 on death" or the abbreviation "POD," after the name of the 3-24 registered owner and before the name of a beneficiary. 3-25 Sec. 471. EFFECT OF REGISTRATION IN BENEFICIARY FORM. The 3-26 designation of a TOD beneficiary on a registration in beneficiary 3-27 form does not affect ownership until the owner's death. A 4-1 registration of a security in beneficiary form may be canceled or 4-2 changed at any time by the sole owner or all then surviving owners, 4-3 without the consent of the beneficiary. 4-4 Sec. 472. OWNERSHIP ON DEATH OF OWNER. On death of a sole 4-5 owner or the last to die of multiple owners, ownership of a 4-6 security registered in beneficiary form passes to the beneficiary 4-7 or beneficiaries who survive all owners. On proof of death of all 4-8 owners and compliance with any applicable requirements of the 4-9 registering entity, a security registered in beneficiary form may 4-10 be reregistered in the name of the beneficiary or beneficiaries who 4-11 survive the death of all owners. Until division of the security 4-12 after the death of all owners, multiple beneficiaries surviving the 4-13 death of all owners hold their interests as tenants in common. If 4-14 no beneficiary survives the death of all owners, the security 4-15 belongs to the estate of the deceased sole owner or the estate of 4-16 the last to die of multiple owners. 4-17 Sec. 473. PROTECTION OF REGISTERING ENTITY. (a) A 4-18 registering entity is not required to offer or to accept a request 4-19 for security registration in beneficiary form. If a registration 4-20 in beneficiary form is offered by a registering entity, the owner 4-21 requesting registration in beneficiary form assents to the 4-22 protections given to the registering entity by this part. 4-23 (b) By accepting a request for registration of a security in 4-24 beneficiary form, the registering entity agrees that the 4-25 registration will be implemented on the death of the deceased owner 4-26 as provided by this part. 4-27 (c) A registering entity is discharged from all claims to a 5-1 security by the estate, creditors, heirs, or devisees of the 5-2 deceased owner if it registers a transfer of a security in 5-3 accordance with Section 472 of this code and does so in good faith 5-4 reliance on the registration, on this part, and on information 5-5 provided to it by affidavit of the personal representative of the 5-6 deceased owner, or by the surviving beneficiary or by the surviving 5-7 beneficiary's representatives, or other information available to 5-8 the registering entity. The protections of this part do not extend 5-9 to a reregistration or payment made after a registering entity has 5-10 received written notice from a claimant to an interest in the 5-11 security objecting to implementation of a registration in 5-12 beneficiary form. No other notice or other information available 5-13 to the registering entity affects its right to protection under 5-14 this part. 5-15 (d) The protection provided by this part to the registering 5-16 entity of a security does not affect the rights of beneficiaries in 5-17 disputes between themselves and other claimants to ownership of the 5-18 security transferred or its value or proceeds. 5-19 Sec. 474. NONTESTAMENTARY TRANSFER ON DEATH. (a) A 5-20 transfer on death resulting from a registration in beneficiary form 5-21 is effective by reason of the contract regarding the registration 5-22 between the owner and the registering entity and this part and is 5-23 not testamentary. 5-24 (b) This part does not limit the rights of creditors of 5-25 security owners against beneficiaries and other transferees under 5-26 other laws of this state. 5-27 Sec. 475. RIGHTS OF CREDITOR ON REGISTRATION. (a) A 6-1 security registered in beneficiary form is not effective against an 6-2 estate of a deceased party to transfer to a survivor sums that are 6-3 otherwise needed to pay debts, taxes, and expenses of 6-4 administration, including statutory allowances to the surviving 6-5 spouse and minor children, if other assets of the estate are 6-6 insufficient. 6-7 (b) A party, POD or TOD payee, or beneficiary who receives a 6-8 payment from or transfer of a security registered in beneficiary 6-9 form after the death of a deceased party is liable to account to 6-10 the deceased party's personal representative for amounts the 6-11 decedent owned beneficially immediately before the decedent's death 6-12 to the extent necessary to discharge the claims and charges 6-13 described by Subsection (a) of this section remaining unpaid after 6-14 application of the decedent's estate, but is not liable in an 6-15 amount greater than the amount that the party, POD or TOD payee, or 6-16 beneficiary received from the security. 6-17 (c) A proceeding to assert the liability provided by 6-18 Subsection (b) of this section may not be commenced unless the 6-19 personal representative has received a written demand by a 6-20 surviving spouse, a creditor, or one acting for a minor child of 6-21 the decedent, and a proceeding may not be commenced later than two 6-22 years after the date of the death of the decedent. Sums recovered 6-23 by the personal representative under this section shall be 6-24 administered as part of the decedent's estate. 6-25 (d) This section does not affect the right of a financial 6-26 institution, a securities issuer, or a securities broker to make a 6-27 payment from or transfer of a security registered in beneficiary 7-1 form according to the terms of the security or impose liability on 7-2 the institution, issuer, or broker to the estate of a deceased 7-3 party unless before the payment or transfer the institution, 7-4 issuer, or broker received written notice from the personal 7-5 representative stating the sums needed to pay debts, taxes, and 7-6 expenses of administration. 7-7 Sec. 476. TERMS, CONDITIONS, AND FORMS FOR REGISTRATION. 7-8 (a) A registering entity offering to accept registrations in 7-9 beneficiary form may establish the terms and conditions under which 7-10 it will receive requests for registration in beneficiary form and 7-11 for implementation of registrations in beneficiary form, including 7-12 requests for cancellation of previously registered TOD beneficiary 7-13 designations and requests for reregistration to effect a change of 7-14 beneficiary. The terms and conditions may provide for proving 7-15 death, avoiding or resolving a problem concerning fractional 7-16 shares, designating primary and contingent beneficiaries, and 7-17 substituting a named beneficiary's descendants to take in the place 7-18 of the named beneficiary in the event of the beneficiary's death. 7-19 Substitution may be indicated by appending to the name of the 7-20 primary beneficiary the letters "LDPS," standing for "lineal 7-21 descendants per stirpes." This designation substitutes a deceased 7-22 beneficiary's descendants who survive the owner for a beneficiary 7-23 who fails to survive the owner, the descendants to be identified 7-24 and to share in accordance with the law of the beneficiary's 7-25 domicile at the owner's death governing inheritance by descendants 7-26 of an intestate. Other forms of identifying beneficiaries who are 7-27 to take on one or more contingencies and rules for providing proofs 8-1 and assurances needed to satisfy reasonable concerns by registering 8-2 entities regarding conditions and identities relevant to accurate 8-3 implementation of registrations in beneficiary form may be 8-4 contained in a registering entity's terms and conditions. 8-5 (b) The following are illustrations of registrations in 8-6 beneficiary form that a registering entity may authorize: 8-7 (1) Sole owner--sole beneficiary: John S Brown TOD 8-8 (or POD) John S Brown Jr. 8-9 (2) Multiple owners--sole beneficiary: John S Brown 8-10 Mary B Brown JT TEN TOD John S Brown Jr. 8-11 (3) Multiple owners--primary and secondary 8-12 (substituted) beneficiaries: John S Brown Mary B Brown, JT TEN TOD 8-13 John S Brown Jr SUB BENE Peter Q Brown or John S Brown Mary B Brown 8-14 JT TEN TOD John S Brown Jr LDPS. 8-15 Sec. 477. NOTICE OF EFFECT OF REGISTRATION. A registering 8-16 entity shall provide to an owner requesting registration of a 8-17 security in beneficiary form a written statement describing the 8-18 legal effects of the registration not later than the date on which 8-19 the owner registers the security. The statement is sufficient if 8-20 it is the same as or substantially similar to the following: 8-21 "On proof of death, your security in beneficiary form will be 8-22 transferred to your named beneficiary or beneficiaries without 8-23 being part of your estate under your will or by intestacy. You 8-24 should make sure before you register your security in beneficiary 8-25 form that the registration does not conflict with any other 8-26 provision in a document that you have authorized and signed, 8-27 including a will or trust agreement. If you have any doubt about 9-1 whether a conflict exists, you should seek the advice of a 9-2 professional in the field of estate planning. You should also note 9-3 that registering your security in beneficiary form may not affect a 9-4 creditor's claim against your estate or affect the estate or 9-5 inheritance tax liability of your estate or of your beneficiary or 9-6 beneficiaries." 9-7 Sec. 478. EFFECT OF CERTAIN SECURITY ACCOUNT ON COMMUNITY 9-8 PROPERTY INTEREST. A security account created with community 9-9 property funds is subject to Section 15, Article XVI, Texas 9-10 Constitution, and does not alter community property rights in any 9-11 form or manner, regardless of whether the security account has been 9-12 registered in beneficiary form. 9-13 Sec. 479. SHORT TITLE: RULES OF CONSTRUCTION. (a) This 9-14 part may be cited as the Uniform Transfer on Death Security 9-15 Registration Act. 9-16 (b) This part shall be liberally construed and applied to 9-17 promote its underlying purposes and policy and to make uniform the 9-18 laws with respect to the subject of this part among states enacting 9-19 it. 9-20 (c) Unless displaced by the particular provisions of this 9-21 part, the principles of law and equity supplement its provisions. 9-22 Sec. 480. APPLICATION OF ACT. This part applies to 9-23 registrations of securities in beneficiary form made before, on, or 9-24 after September 1, 1997, by decedents dying on or after September 9-25 1, 1997. 9-26 SECTION 2. This Act takes effect September 1, 1997. 9-27 SECTION 3. The importance of this legislation and the 10-1 crowded condition of the calendars in both houses create an 10-2 emergency and an imperative public necessity that the 10-3 constitutional rule requiring bills to be read on three several 10-4 days in each house be suspended, and this rule is hereby suspended.