When you are helping to settle a deceased relative’s estate, you may come across some transfer on death securities. To properly pass on all the estate assets to their new owners, you will have to figure out who should receive these securities.
Securities include stocks, mutual funds, ETFs, bonds, and other shares or marginal shares in companies. Most people own their securities personally – if they have stock certificates, their names are listed. If they have online brokerage accounts, the accounts were opened in their names only. Securities owned personally pass on to the designated heirs listed in your relative’s will. If your relative placed the securities in a trust instead, then the trustee will oversee them for the beneficiaries’ benefit.
Sometimes, people choose to make their securities “transferable on death”. This means that someone besides the original owner will become the securities’ new owner when the original owner passes away. The transfer becomes effective automatically on death, regardless of any language in the original owner’s will.
California has a special law permitting transfer on death securities called the California Uniform Transfer on Death Security Registration Act. It says that securities qualify if the registration says “transfer on death” or “TOD” after the original owner’s name and before the beneficiary’s (new owner’s) name. For example, the registration certification could say “Mary Smith TOD John Smith”.
More than one person can own a TOD security. In that case the registration certificate would indicate that the owners are joint tenants using the abbreviation “JT TEN”. Also, owners of TOD securities can designate substitute beneficiaries, listing them on the certificate by the abbreviation “SUB BENE”. For example, a certificate could say “Mary Smith Sara Brown JT TEN TOD John Smith SUB BENE Chris Smith.”
The transfer on death provision has no effect until all the security’s owners die. If there is a joint tenancy, the surviving joint tenant becomes the full owner of the security until he or she dies. Only then can the beneficiary receive the security. If you are the beneficiary of a TOD security, you should contact the security’s issuer and show it a proof of death, such as a death certificate. Ask the issuer to re-register the security in your name.
People distributing a relative’s estate or beneficiaries who have questions about transfer on death securities should contact an estate planning attorney in their state.
Are transfer on death securities and other estate planning tools causing you trouble? Angela Klenk, Esq. and the team at Beach Cities Estate Law couple personalized attention to your estate plan with big law firm experience for a winning combination to give you peace of mind. To schedule a case evaluation, visit Beach Cities Estate Law online or call Angela’s office at (424) 400-2125.