National Conference of Commissioners on Uniform State Laws

211 E. Ontario St., Suite 1300, Chicago, IL 60611
tel 312-915-0195, fax 312-915-0187

For Immediate Release

Transfer on Death Security Registration:
An Answer to the Woes of Joint Ownership of Securities
Now the Law in 46 States

January 2000 - Legislation on the books in 46 states gives the owners of investment securities a practical alternative to the often troublesome joint form of title, which is frequently used as a non-probate mechanism to transfer securities to a named beneficiary after death.

The Uniform TOD Security Registration Act (UTODSRA) was drafted by the National Conference of Commissioners on Uniform State Laws in 1989 to extend the advantages of the P.O.D. [paid on death] bank deposit account concept to investment securities. The letters TOD stand for "transfer on death," signaling that stocks, bonds, mutual funds or a securities account are to be re-registered in the name of the beneficiary after the original owner's death.

Among active supporters of this legislation is the national AARP organization, which has endorsed the UTODSRA because it protects the assets of older people from being used by a beneficiary prior to death. Consider a scenario in which a parent joins an adult child in ownership of a mutual fund account, with the sole aim of avoiding probate at death. The child's business goes under; creditors take half of the account to pay off the child's debts. Or a parent who initially put an account into joint tenancy decides to change that joint registration, but has difficulty in doing so because the child will not consent to the change, and stock standing in two names calls for signatures of both if it is to be transferred. Or the child's spouse demands that the child's share be included in the property to be divided in a divorce. Under TOD, these problems cannot occur as there is no change in ownership during the owner's lifetime.
"The transfer-on-death registration mechanism forces nothing on anyone and proposes nothing that is novel," says Richard V. Wellman, Executive Director Emeritus of the Joint Editorial Board for the Uniform Probate Code. "It is a far more sensible alternative to the joint tenancy form of title, providing the benefits of a joint registration while avoiding the loss of sole control for the owner. It's simple and it works," says Wellman.

Under TOD, the transfer occurs when the issuer of the security is presented with adequate evidence of the owner's death. Like joint tenancy, the transfer does not fall into the deceased owners probate estate. But, apart from protecting an issuer who transfers in accordance with the registration form before receiving notice of a conflicting claim, the act is not meant to change current law regarding spousal or creditors' rights and will not avoid any estate or inheritance taxes that may arise.
The Security Industry Association has also strongly endorsed this legislation, as it places investment firms on a more level playing field with banks, enabling the firms to offer their clients a way to transfer title automatically upon death. In doing so, the act eliminates the administrative burden currently placed on security firms if securities fall into the probate estate. The UTODSRA has also been endorsed by the American Bar Association.

The public interest is served by legislation that provides a safer and more useful format for transferring assets outside of probate. The 46 states that have adopted TOD seem to agree. They are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

The ULC, officially known as the National Conference of Commissioners on Uniform State Laws, is now in its 109th year. The organization comprises more than 300 lawyers, judges, and law professors, appointed by the states as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, to draft proposals for uniform and model laws and work toward their enactment in their legislatures. Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

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