Dear Friends
In an effort to keep our clients and friends apprised of recent legal developments which may effect them in their personal, financial and legal planning, we periodically notify them by a letter or memorandum summarizing areas that we think will be of interest. In this brief memo we focus on:
REGISTRATION OF SECURITIES IN "TOD" FORM
Effective December 2, 1996, Michigan adopted a new law pertaining to securities. Stock or other securities can now be owned in one name or multiple names, and then be transferred to a designated beneficiary or beneficiaries upon the owner's or owners' death(s).
The new law, MCLA 451.471, et seq. allows securities owned by an individual or by multiple owners (except those held as tenants in common) to be registered in "beneficiary form" by using the words "transfer on death" ("TOD") or by the words "pay on death" ("POD") after the name of the registered owner and before the name of a beneficiary. MCLA 451.475. The following are examples of registrations in beneficiary form that are authorized MCLA 451.480(4):
(a) Sole owner -- sole beneficiary: John S Brown TOD (or POD) John S Brown Jr
(b) Multiple Owners -- sole beneficiary: John S. Brown, Mary B Brown JT TEN TOD John S Brown Jr
(c) Multiple owners -- primary and secondary beneficiaries: John S Brown, Mary B Brown JT TEN TOD John S Brown Jr SUB
BENE Peter Q Brown or John S Brown, Mary B Brown JT TEN John S Brown Jr LDPS (Lineal Descendants Per Stirpes). This type of ownership can be helpful to obtain stepped-up tax basis for the full amount of the security upon the death of the owner, thus possibly escaping capital gains tax if the stock is later sold by the beneficiary. It also avoids probate; the designation is not testamentary. "By accepting a request for registration of a security in beneficiary form, the registering entity agrees that the registration will be implemented on the death of the deceased owner as provided in this act." MCLA 451.478(3).
Registration in this "beneficiary form" has no effect until the owner dies. It may be changed or canceled at any time by the owner without the consent of the beneficiary, avoiding the problem with joint accounts of having to obtain consent of the joint owner of the account, even if his or her name is on the account as joint owner for convenience only.
Please contact us if you would like further information about this Memorandum. Also, if you know anyone else who would like a copy of this Memorandum, please let us know.
This Memorandum is intended to provide general information concerning legal developments. It is not intended to be and should not be regarded as a legal opinion or legal advice on which you should rely without seeking legal counsel.