TOD Security Registration Act Summary

The Uniform TOD Security Registration Act is a late-1989 product of the National Conference of Commissioners on Uniform State Laws. The proposed statute is wholly enabling; it forces nothing on anyone. It is addressed to financial intermediaries, such as mutual funds, banks and brokers maintaining securities accounts for customers, and other organizations responsible for registries showing investment ownerships. The statute encourages and protects intermediaries who decide to offer a security or account registration form showing the owner's name and another designated as the owner's choice to become owner at the owner's death. A registration under the act might say: "owner; John Q. Investor; TOD beneficiary, Martha G. Investor" or more simply, just "John Q. Investor TOD Martha G. Investor." The letters T.O.D. stand for "transfer on death" signaling that the investment or account is to be re-registered on request after the owner's death in the name of the beneficiary.

Control of an investment registered in TOD beneficiary form, including the right to change or cancel the death beneficiary, lies solely with the owner and may be exercised via use of the intermediary's standard procedures for new registrations.

As is so with securities registered in two names with right of survivorship, the transfer of ownership at an owner's death to a survivor designated in the title form results from the registration form and occurs outside the probate process and without reference to any will. Proof of death and survivorship necessary to effect a re-registration or liquidation after the owner's death will be handled as survivorship claims of surviving joint tenants are handled today; i.e., by submission of a death certificate and an application for liquidation or re-registration in the beneficiary's name.

The statute proposes nothing that is novel or untested. Beneficiary form registrations of U.S. Savings Bonds have been available under federal law for more than half a century. Bank accounts and c.d.'s in an owner's sole name and payable on death to a named beneficiary are available in a number of states under p.o.d. account rules found in many banking codes. Life insurance and retirement benefit accounts by-pass probate en route to death beneficiaries designated in controlling paperwork. Mutual funds have occasionally offered a trust form registration that, like bank accounts in the name of one as trustee for another, achieve the results of a TOD registration by use of language that is much less understandable as to its purpose.

The statute enables avoidance of probate without the risk of problems caused by joint and survivor security titles that are especially hard on the elderly. A person, typically elderly and worried about the impact of high probate costs on family survivors, decides to add the name of a child to her own to create a joint tenancy with right of survivorship on a security or account title. The sole purpose is probate avoidance. The elderly originator of the joint holding probably does not realize that the one named co-owner now appears to own half of the asset meaning that the investment can't be cashed out or re-registered without the consent of both owners. The bad news may come when a child's creditors or divorcing spouse lays claim to the child's half. In short, to get the benefit of probate avoidance through co-ownership and survivorship, an elderly owner has to subject money set aside for future needs to the whims and claims of others, including possible strangers to the family. TOD security registration merely permits realization of the probate avoidance benefits of a joint registration but avoids the loss of sole control for the owner. In time, the TOD registration form should replace joint and survivor titling of investments.

This simple bill is very important for it responds directly and efficiently to serious problems having a unique impact on the elderly that attend joint and survivor titling of investments. It also sanctions a title form that would enable probate-avoiding transfers at death in favor of any death beneficiary, possibly including recognized charitable organizations or a trust company that could not be listed as a co-owner with survivorship under conventional joint tenancy rules. It entails no unwanted costs for anyone, meets a strong need of the elderly, and is without downside risks to any but those very few who continue to feed on assets passing through probate.