CBA Publications >> CBA Regulatory Compliance Bulletin >> Vol 2002 No.13 October 1, 2002

Vol 2002 No. 13 October 1, 2002

Securities Available for TOD Treatment Expanded

SB 1271, a bill sponsored by the California Bankers Association, allows trust companies and trust departments of banks to issue and register securities under the Uniform Transfer On Death Securities Registration Act (the "TOD Act"). Under existing Probate Code Section 5500 et seq., certain securities may be transferred outside of probate through use of a specified "beneficiary form" of title. This transfers ownership and title of the security to a beneficiary upon the owner's death. The beneficiary form of title must be registered in order to be effective.

The form was created as an alternative to holding title in joint tenancy with right of survivorship, which normally entails a lifetime sharing of entitlement and control over the property by the joint tenants until one of them dies. The TOD title allows the owner to exercise control until death, upon which time entitlement and control shifts to the designated beneficiary without the need for a court order.

While bank trust departments and trust companies have for years been able to conduct securities transactions in the context of investment accounts for estate planning purposes (and under the Gramm-Leach-Bliley Act can sell securities) they were not included in the definition of a "registering entity" when the TOD Act was passed.

The bill, which amends Probate Code Section 5501, is intended to offer bank customers easier access to this means of probate avoidance and allow them to compete on a more equal footing with brokerage companies, whose brokerage accounts are already covered. The bill (as later modified by SB 1504) adds "cash equivalents," defined as "an investment that is easily converted into cash, including, treasury bills, treasury notes, money market funds, savings bonds, short-term instruments, and short-term obligations."

In addition, the definition of security accounts covered under the TOD Act would be expanded to include any investment management or custody account with a trust company or trust department of a bank with trust powers. The bill also clarifies that the section amended by the bill does not govern cash equivalents in multiple-party accounts governed by the California Multiple-Party Accounts Law, which governs distribution of assets held in multiple party accounts held on deposit in financial institutions. (Probate Code section 5100 et seq.)

Questions may be directed to the lead CBA lobbyist on SB 1271, Maurine Padden, VP/Chief Legislative Counsel at 916-441-7377 x212.