1-1 By: Harris S.B. No. 504 1-2 (In the Senate - Filed February 10, 1997; February 12, 1997, 1-3 read first time and referred to Committee on Jurisprudence; 1-4 March 4, 1997, reported favorably by the following vote: Yeas 4, 1-5 Nays 0; March 4, 1997, sent to printer.) 1-6 A BILL TO BE ENTITLED 1-7 AN ACT 1-8 relating to the adoption of the Uniform Transfer on Death Security 1-9 Registration Act. 1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-11 SECTION 1. Chapter XI, Texas Probate Code, is amended by 1-12 adding Part 4 to read as follows: 1-13 PART 4. UNIFORM TRANSFER ON DEATH SECURITY 1-14 REGISTRATION ACT 1-15 Sec. 466. DEFINITIONS. In this part: 1-16 (1) "Beneficiary form" means a registration of a 1-17 security that indicates the present owner of the security and the 1-18 intention of the owner regarding the person who will become the 1-19 owner of the security on the death of the owner. 1-20 (2) "Person" includes a corporation, organization, 1-21 government or governmental subdivision or agency, business trust, 1-22 estate, trust, partnership, association, and any other legal 1-23 entity. 1-24 (3) "Register," including its derivatives, means to 1-25 issue a certificate showing the ownership of a certificated 1-26 security or, in the case of an uncertificated security, to initiate 1-27 or transfer an account showing ownership of securities. 1-28 (4) "Registering entity" means a person who originates 1-29 or transfers a security title by registration and includes a broker 1-30 maintaining security accounts for customers and a transfer agent or 1-31 other person acting for or as an issuer of securities. 1-32 (5) "Security" means a share, participation, or other 1-33 interest in property, in a business, or in an obligation of an 1-34 enterprise or other issuer and includes a certificated security, an 1-35 uncertificated security, and a security account. 1-36 (6) "Security account" means: 1-37 (A) a reinvestment account associated with a 1-38 security, a securities account with a broker, a cash balance in a 1-39 brokerage account, cash, interest, earnings, or dividends earned or 1-40 declared on a security in an account, a reinvestment account, or a 1-41 brokerage account, whether or not credited to the account before 1-42 the owner's death; or 1-43 (B) a cash balance or other property held for or 1-44 due to the owner of a security as a replacement for or product of 1-45 an account security, whether or not credited to the account before 1-46 the owner's death. 1-47 (7) "State," when referring to a part of the United 1-48 States, includes any state, district, commonwealth, territory, and 1-49 insular possession of the United States and any area subject to the 1-50 legislative authority of the United States of America. 1-51 Sec. 467. REGISTRATION IN BENEFICIARY FORM; SOLE OR JOINT 1-52 TENANCY OWNERSHIP. Only an individual whose registration of a 1-53 security shows sole ownership by one individual or multiple 1-54 ownership by two or more with right of survivorship, rather than as 1-55 tenants in common, may obtain registration in beneficiary form. 1-56 Multiple owners of a security registered in beneficiary form hold 1-57 as joint tenants with right of survivorship, as tenants by the 1-58 entireties, or as owners of community property held in survivorship 1-59 form, and not as tenants in common. 1-60 Sec. 468. REGISTRATION IN BENEFICIARY FORM; APPLICABLE LAW. 1-61 A security may be registered in beneficiary form if the form is 1-62 authorized by this part or a similar statute of the state of 1-63 organization of the issuer or registering entity, the location of 1-64 the registering entity's principal office, the office of its 2-1 transfer agent, or its office making the registration, or by this 2-2 uniform act or a similar statute of the law of the state listed as 2-3 the owner's address at the time of registration. A registration 2-4 governed by the law of a jurisdiction in which this uniform act or 2-5 similar legislation is not in force or was not in force when a 2-6 registration in beneficiary form was made is nevertheless presumed 2-7 to be valid and authorized as a matter of contract law. 2-8 Sec. 469. ORIGINATION OF REGISTRATION IN BENEFICIARY FORM. 2-9 A security, whether evidenced by certificate or account, is 2-10 registered in beneficiary form if the registration includes a 2-11 designation of a beneficiary to take the ownership at the death of 2-12 the owner or the deaths of all multiple owners. 2-13 Sec. 470. FORM OF REGISTRATION IN BENEFICIARY FORM. 2-14 Registration in beneficiary form may be shown by the words 2-15 "transfer on death" or the abbreviation "TOD" or by the words "pay 2-16 on death" or the abbreviation "POD," after the name of the 2-17 registered owner and before the name of a beneficiary. 2-18 Sec. 471. EFFECT OF REGISTRATION IN BENEFICIARY FORM. The 2-19 designation of a TOD beneficiary on a registration in beneficiary 2-20 form does not affect ownership until the owner's death. A 2-21 registration of a security in beneficiary form may be canceled or 2-22 changed at any time by the sole owner or all then surviving owners, 2-23 without the consent of the beneficiary. 2-24 Sec. 472. OWNERSHIP ON DEATH OF OWNER. On death of a sole 2-25 owner or the last to die of multiple owners, ownership of a 2-26 security registered in beneficiary form passes to the beneficiary 2-27 or beneficiaries who survive all owners. On proof of death of all 2-28 owners and compliance with any applicable requirements of the 2-29 registering entity, a security registered in beneficiary form may 2-30 be reregistered in the name of the beneficiary or beneficiaries who 2-31 survive the death of all owners. Until division of the security 2-32 after the death of all owners, multiple beneficiaries surviving the 2-33 death of all owners hold their interests as tenants in common. If 2-34 no beneficiary survives the death of all owners, the security 2-35 belongs to the estate of the deceased sole owner or the estate of 2-36 the last to die of multiple owners. 2-37 Sec. 473. PROTECTION OF REGISTERING ENTITY. (a) A 2-38 registering entity is not required to offer or to accept a request 2-39 for security registration in beneficiary form. If a registration 2-40 in beneficiary form is offered by a registering entity, the owner 2-41 requesting registration in beneficiary form assents to the 2-42 protections given to the registering entity by this part. 2-43 (b) By accepting a request for registration of a security in 2-44 beneficiary form, the registering entity agrees that the 2-45 registration will be implemented on the death of the deceased owner 2-46 as provided by this part. 2-47 (c) A registering entity is discharged from all claims to a 2-48 security by the estate, creditors, heirs, or devisees of the 2-49 deceased owner if it registers a transfer of a security in 2-50 accordance with Section 472 of this code and does so in good faith 2-51 reliance on the registration, on this part, and on information 2-52 provided to it by affidavit of the personal representative of the 2-53 deceased owner, or by the surviving beneficiary or by the surviving 2-54 beneficiary's representatives, or other information available to 2-55 the registering entity. The protections of this part do not extend 2-56 to a reregistration or payment made after a registering entity has 2-57 received written notice from a claimant to an interest in the 2-58 security objecting to implementation of a registration in 2-59 beneficiary form. No other notice or other information available 2-60 to the registering entity affects its right to protection under 2-61 this part. 2-62 (d) The protection provided by this part to the registering 2-63 entity of a security does not affect the rights of beneficiaries in 2-64 disputes between themselves and other claimants to ownership of the 2-65 security transferred or its value or proceeds. 2-66 Sec. 474. NONTESTAMENTARY TRANSFER ON DEATH. (a) A 2-67 transfer on death resulting from a registration in beneficiary form 2-68 is effective by reason of the contract regarding the registration 2-69 between the owner and the registering entity and this part and is 3-1 not testamentary. 3-2 (b) This part does not limit the rights of creditors of 3-3 security owners against beneficiaries and other transferees under 3-4 other laws of this state. 3-5 Sec. 475. RIGHTS OF CREDITOR ON REGISTRATION. (a) A 3-6 security registered in beneficiary form is not effective against an 3-7 estate of a deceased party to transfer to a survivor sums that are 3-8 otherwise needed to pay debts, taxes, and expenses of 3-9 administration, including statutory allowances to the surviving 3-10 spouse and minor children, if other assets of the estate are 3-11 insufficient. 3-12 (b) A party, POD or TOD payee, or beneficiary who receives a 3-13 payment from or transfer of a security registered in beneficiary 3-14 form after the death of a deceased party is liable to account to 3-15 the deceased party's personal representative for amounts the 3-16 decedent owned beneficially immediately before the decedent's death 3-17 to the extent necessary to discharge the claims and charges 3-18 described by Subsection (a) of this section remaining unpaid after 3-19 application of the decedent's estate, but is not liable in an 3-20 amount greater than the amount that the party, POD or TOD payee, or 3-21 beneficiary received from the security. 3-22 (c) A proceeding to assert the liability provided by 3-23 Subsection (b) of this section may not be commenced unless the 3-24 personal representative has received a written demand by a 3-25 surviving spouse, a creditor, or one acting for a minor child of 3-26 the decedent, and a proceeding may not be commenced later than two 3-27 years after the date of the death of the decedent. Sums recovered 3-28 by the personal representative under this section shall be 3-29 administered as part of the decedent's estate. 3-30 (d) This section does not affect the right of a financial 3-31 institution, a securities issuer, or a securities broker to make a 3-32 payment from or transfer of a security registered in beneficiary 3-33 form according to the terms of the security or impose liability on 3-34 the institution, issuer, or broker to the estate of a deceased 3-35 party unless before the payment or transfer the institution, 3-36 issuer, or broker received written notice from the personal 3-37 representative stating the sums needed to pay debts, taxes, and 3-38 expenses of administration. 3-39 Sec. 476. TERMS, CONDITIONS, AND FORMS FOR REGISTRATION. 3-40 (a) A registering entity offering to accept registrations in 3-41 beneficiary form may establish the terms and conditions under which 3-42 it will receive requests for registration in beneficiary form and 3-43 for implementation of registrations in beneficiary form, including 3-44 requests for cancellation of previously registered TOD beneficiary 3-45 designations and requests for reregistration to effect a change of 3-46 beneficiary. The terms and conditions may provide for proving 3-47 death, avoiding or resolving a problem concerning fractional 3-48 shares, designating primary and contingent beneficiaries, and 3-49 substituting a named beneficiary's descendants to take in the place 3-50 of the named beneficiary in the event of the beneficiary's death. 3-51 Substitution may be indicated by appending to the name of the 3-52 primary beneficiary the letters "LDPS," standing for "lineal 3-53 descendants per stirpes." This designation substitutes a deceased 3-54 beneficiary's descendants who survive the owner for a beneficiary 3-55 who fails to survive the owner, the descendants to be identified 3-56 and to share in accordance with the law of the beneficiary's 3-57 domicile at the owner's death governing inheritance by descendants 3-58 of an intestate. Other forms of identifying beneficiaries who are 3-59 to take on one or more contingencies and rules for providing proofs 3-60 and assurances needed to satisfy reasonable concerns by registering 3-61 entities regarding conditions and identities relevant to accurate 3-62 implementation of registrations in beneficiary form may be 3-63 contained in a registering entity's terms and conditions. 3-64 (b) The following are illustrations of registrations in 3-65 beneficiary form that a registering entity may authorize: 3-66 (1) Sole owner--sole beneficiary: John S Brown TOD 3-67 (or POD) John S Brown Jr. 3-68 (2) Multiple owners--sole beneficiary: John S Brown 3-69 Mary B Brown JT TEN TOD John S Brown Jr. 4-1 (3) Multiple owners--primary and secondary 4-2 (substituted) beneficiaries: John S Brown Mary B Brown, JT TEN TOD 4-3 John S Brown Jr SUB BENE Peter Q Brown or John S Brown Mary B Brown 4-4 JT TEN TOD John S Brown Jr LDPS. 4-5 Sec. 477. NOTICE OF EFFECT OF REGISTRATION. A registering 4-6 entity shall provide to an owner requesting registration of a 4-7 security in beneficiary form a written statement describing the 4-8 legal effects of the registration not later than the date on which 4-9 the owner registers the security. The statement is sufficient if 4-10 it is the same as or substantially similar to the following: 4-11 "On proof of death, your security in beneficiary form will be 4-12 transferred to your named beneficiary or beneficiaries without 4-13 being part of your estate under your will or by intestacy. You 4-14 should make sure before you register your security in beneficiary 4-15 form that the registration does not conflict with any other 4-16 provision in a document that you have authorized and signed, 4-17 including a will or trust agreement. If you have any doubt about 4-18 whether a conflict exists, you should seek the advice of a 4-19 professional in the field of estate planning. You should also note 4-20 that registering your security in beneficiary form may not affect a 4-21 creditor's claim against your estate or affect the estate or 4-22 inheritance tax liability of your estate or of your beneficiary or 4-23 beneficiaries." 4-24 Sec. 478. EFFECT OF CERTAIN SECURITY ACCOUNT ON COMMUNITY 4-25 PROPERTY INTEREST. A security account created with community 4-26 property funds is subject to Section 15, Article XVI, Texas 4-27 Constitution, and does not alter community property rights in any 4-28 form or manner, regardless of whether the security account has been 4-29 registered in beneficiary form. 4-30 Sec. 479. SHORT TITLE: RULES OF CONSTRUCTION. (a) This 4-31 part may be cited as the Uniform Transfer on Death Security 4-32 Registration Act. 4-33 (b) This part shall be liberally construed and applied to 4-34 promote its underlying purposes and policy and to make uniform the 4-35 laws with respect to the subject of this part among states enacting 4-36 it. 4-37 (c) Unless displaced by the particular provisions of this 4-38 part, the principles of law and equity supplement its provisions. 4-39 Sec. 480. APPLICATION OF ACT. This part applies to 4-40 registrations of securities in beneficiary form made before, on, or 4-41 after September 1, 1997, by decedents dying on or after September 4-42 1, 1997. 4-43 SECTION 2. This Act takes effect September 1, 1997. 4-44 SECTION 3. The importance of this legislation and the 4-45 crowded condition of the calendars in both houses create an 4-46 emergency and an imperative public necessity that the 4-47 constitutional rule requiring bills to be read on three several 4-48 days in each house be suspended, and this rule is hereby suspended. 4-49 * * * * *