C.S.H.B. 1590 78(R)    BILL ANALYSIS


C.S.H.B. 1590
By: Paxton
Judicial Affairs
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Under current law, each party to a multiple party account may use the
funds in that account.  For instance, one party could withdraw the entire
balance and deposit the funds in his or her own personal account.  In
addition, a party to a multiple party account cannot prevent the estate of
a deceased party to the account from transferring to a survivor the sums
needed to pay debts, taxes and the expenses of administration if other
estate assets are insufficient.   

A court decision in Kansas reported in a widely read banking trade
publication raised the issue of whether a secured creditor of one party to
a multiple party account can seize the funds in that account to satisfy a
lien against that party.  It is generally understood in Texas that a
secured creditor has this right - that any party to a multiple party
account may pledge that account.   C.S.H.B. 1590 clarifies Texas law in
this area to provide statutory basis for what is already widely accepted
practice in the banking community.  The bill also makes it clear that a
convenience signer (who has no ownership interest in the account) may not
pledge an account. 

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. 

ANALYSIS

C.S.H.B. 1590 amends Section 442 of the Probate Code to provide that no
multiple-party account will be effective against the claim of a secured
creditor who has a lien on the account.  A party to a multiple-party
account may pledge the account or otherwise create a security interest in
the account without the joinder of, as appropriate, a P.O.D (pay on death)
payee, a beneficiary, convenience signer, or any other party to a joint
account, regardless of whether there is a right of survivorship.  
The bill specifies that a convenience signer may not pledge or otherwise
create a security interest in an account.   

The bill adds the term "claims" to the part of the existing Section 442
relating to the liability of a financial institution to the estate of a
deceased party.   

The bill also requires that certain notice be provided to any party to a
multiple party account who did not create the security interest in the
account.  

EFFECTIVE DATE

September 1, 2003.


COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute adds a provision requiring that certain notice be provided
to any party to a multiple party account who did not create the security
interest in the account.