Property: nonprobate transfer of ownership., the official text

An act to amend Section 5507 of the Probate Code, relating to property.

LEGISLATIVE COUNSEL'S DIGEST

Existing law, the Uniform TOD Security Registration Act, provides for the transfer of ownership or proceeds of a security, as defined, by a registering entity to the designated beneficiary or beneficiaries upon the death of the owner without probate or estate administration, as specified.
This bill would require a registering entity that receives information establishing knowledge of the death of all owners of a security designated for nonprobate transfer held by that registering entity to initiate its beneficiary notification process, as specified. The bill would require the registering entity to make a reasonable and good-faith effort, as defined, to notify each named beneficiary. The bill would require a beneficiary who has provided all required documentation to the registered entity to receive their designated share within 60 days of completing the registering entity’s process, as specified.
This bill would specify the necessary information for a nonprofit corporation, charitable trust, or entity that is exempt from federal taxation to establish its legal identity for these purposes. The bill would prohibit a registering entity from requesting additional information, including, among other things, a social security number and driver’s license number, from an individual employed by, or serving on the board of, those types of beneficiaries, except as specified. The bill would require a registering entity to permit those types of beneficiaries to demonstrate their entitlement to a security by providing specific documentation.
This bill would provide that it does not apply when the death of all owners of a security occurred before January 1, 2027.

The people of the State of California do enact as follows:

SECTION 1.
Section 5507 of the Probate Code is amended to read:
5507.
(a) On death of a sole owner or the last to die of all multiple owners, ownership of securities registered in beneficiary form passes to the beneficiary or beneficiaries who survive all owners. On proof of death of all owners and compliance with any applicable requirements of the registering entity, a security registered in beneficiary form may be reregistered in the name of the beneficiary or beneficiaries who survive the death of all owners. Until division of the security after the death of all owners, multiple beneficiaries surviving the death of all owners hold their interests as tenants in common. If no beneficiary survives the death of all owners, the security belongs to the estate of the deceased sole owner or the estate of the last to die of all multiple owners.
(b) Upon receipt of information establishing knowledge of death of all owners of a security, including, but not limited to, a certified informational copy of a death certificate, a Consular Report of Death Abroad, a presumption of death order, a Death Master File match, or other information in a registered entity’s records from which the registered entity should know that the owner has died, the registering entity shall initiate its beneficiary notification process. Only one such document from a party, including, but not limited to, an executor, trustee, beneficiary, or personal representative, is required to begin the process.
(c) (1) Upon receipt of information establishing knowledge of death of all owners of the security, the registering entity shall, within 60 days, make a reasonable and good-faith effort to notify each named beneficiary. The initial notification shall not disclose the account balance, transaction history, or other private financial information. The registering entity shall disclose the percentage and amount of a beneficiary’s designated share to the beneficiary after their identity is confirmed.
(2) As used in this subdivision, “a reasonable and good-faith effort” may include acting on information provided in the client’s records and information provided by the decedent, executor, trustee, or other credible source.
(d) (1) Notwithstanding Section 5510, the legal identity of a nonprofit corporation, a charitable trust, or an entity exempt from federal taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (26 U.S.C. Sec. 501(c)(3)), shall be established by providing to the registering entity a federal employer identification number (EIN), telephone number, and mailing address. The registering entity shall not require any individual associated with the beneficiary entity to provide personal identifying information.
(2) The registering entity shall not request any additional personal information from an individual employed by, or serving on the board of, a beneficiary that is described in subdivision (d), including, but not limited to, any of the following:
(A) Social security number.
(B) Driver’s license number.
(C) Date of birth.
(D) Passport.
(E) Home address or phone number.
(F) Annual income, including child support.
(G) Value of personal assets or sources of income.
(H) Marital status.
(I) Number of dependents.
(J) Spouse’s maiden name.
(K) Contact information.
(L) Other personal financial information.
(3) (A) Notwithstanding subparagraph (B) of paragraph (2), if an individual appears in person for the purpose of claiming or receiving property, the holder of the property may request the presentation of a valid government-issued photo identification for the sole purpose of verifying the identity of the individual and the individual’s authority to act on behalf of the charitable organization.
(B) Identification is not required for a claim that is submitted by mail, electronic transmission, or another not-inperson means.
(e) Notwithstanding Section 5510, a registering entity shall permit an entity described in subdivision (d) to demonstrate its entitlement to a security by providing all of the following documentation:
(1) Proof of decedent’s death through provision of an informational copy of a death certificate, Consular Report of Death Abroad, or a presumption of death order.
(2) A copy of a nonprofit entity’s Internal Revenue Service tax-exempt status letter, as applicable.
(3) The entity’s EIN and contact information.
(4) A completed Internal Revenue Service Form W-9 request for taxpayer identification number and certificate.
(f) Notwithstanding Section 5510, the registering entity shall not require a beneficiary described in subdivision (d) to provide information about a decedent owner other than what is reasonably necessary to identify the decedent and the security. The inability of a beneficiary described in subdivision (d) to provide the personal data of a decedent owner, such as a social security number, shall not be grounds for denial of a claim.
(g) A security may be disbursed to a beneficiary through check, fund transfer, or another method that does not require a beneficiary to open an account. A registering entity shall not require a beneficiary to open an account in order to receive ownership of the registered securities or otherwise become a customer of a specific registered entity.
(h) A registering entity shall make reasonable efforts to streamline transfers of securities. If there is more than one beneficiary, a registering entity shall not require the beneficiaries to submit claims simultaneously or impose coordination deadlines among co-beneficiaries. If there is more than one beneficiary, no more than one beneficiary shall be required to submit proof of death of the owner or owners.
(i) A beneficiary who has provided all required documentation to the registering entity shall receive their designated share within 60 days of completing the registering entity’s process and shall not be required to wait for any other beneficiary to act before transfer, unless legally required due to outstanding liens, levies, or court orders affecting the estate or account. Any such legal impediment to transfer shall be disclosed to the beneficiary upon inquiry.
(j) (1) Compliance with this section is not required if it would cause a registering entity to violate federal or state law, including the rules of a self-regulatory organization registered under the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a et seq.), or promulgated regulations.
(2) A violation of an internal policy or guideline does not excuse compliance unless the policy or guideline is expressly required by federal or state law, including the rules of a self-regulatory organization registered under the federal Securities Exchange Act of 1934 (15 U.S.C. Sec. 78a et seq.), or promulgated regulations.
(k) If compliance with the requirements of this section would cause a violation as described in subdivision (j), the registering entity shall notify the beneficiary of the specific legal authority for the noncompliance by providing a written notice to the beneficiary within 30 days that includes both of the following:
(1) A citation to the specific statute or regulation that would be violated.
(2) A plain-language description of the information or action required from the beneficiary to satisfy and comply with that specific legal requirement.
(l) A registering entity that originates or transfers securities in reliance on documentation that complies with this section shall be discharged from all claims to the security by the estate, creditors, heirs, or devisees of a deceased owner to the same extent as, and subject to the same requirements, described in Section 5508.
(m) This section does not apply when the death of all owners of a security occurred before January 1, 2027.