Transfer-On-Death Accounts: Easy as Pie, But Not a Piece of Cake

(Originally published on LinkedIn on October 17, 2023)

Of the many ways to avoid probate, the “transfer on death” account, usually created with the stroke of a pen, is the most popular and certainly the easiest.  Except when it isn’t.  And in the state of Louisiana, this method of post-mortem gifting is a roll of the dice.

Louisiana has a strong public policy favoring the passage of assets through probate.  Two recent cases illustrate how that can play out for brokerage accounts. In one case, the testator bequeathed his Vanguard brokerage account to his son via a “transfer on death” form Vanguard supplied.  Although the executor opposed the non-probate transfer, the son prevailed.  A dispositive fact in the case was the choice of law provision (Pennsylvania) incorporated in the agreement between Vanguard and the decedent. In Re Schimek, 302 So.2d 78 (La. App. 2020)

In Succession of Catchings, _____ So.3d. ____ (La. App. 2023), Mary Thompson, TOD beneficiary of the decedent’s brokerage account, was not so lucky. Even though she was also included in the will, Ms. Thompson lost out on the stock account because the TOD form failed to comply with “the requirements prescribed for a valid testament.”  The account at issue was held by Lord Abbett, a New Jersey company. Its agreement was likely governed by a law other than Louisiana’s, making the decision even more puzzling.

Very occasionally, we see wills with a “belt and suspenders” provision like “All beneficiary designations that I have made of other assets will have full force and effect regardless of the provisions of my will.”  Good idea, but it will not work in Louisiana.  The state gives no effect to testamentary writings that are simply incorporated by reference into a will. Succession of Perritt, 253 So.3d 861 (La. App. 2018), writ denied, 256 So.3d 994 (La. 2018).

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