FINRA Arbitrators Revise Beneficiaries in Transfer on Death Accounts

October 27, 2021

Indeed, the dead tend to keep secrets. Among the more disquieting silences are those involving brokerage accounts that were supposed to have Transfer on Death ("TOD") beneficiaries but, for one reason or another, those designations didn't get made, or, if they did, the paperwork wasn't executed. Thus, we are left with the often-voiced promises by a now-deceased accountholder to transfer his holdings to Jane or Joe or Jack or Jill but, oh my, there's no executed authorization in place. Which often leads to charges that the deceased made it very, very clear to her stockbroker that the TODs were to be put in place, which prompts much finger-pointing and that leads to the blame game, which is often the last step before the lawsuit. 

Case in Point

In a FINRA Arbitration Statement of Claim filed in July 2020, public customer Claimants asserted negligence; breaches of fiduciary duty, of contract, and of oral agreement; and respondeat superior. In the Matter of the Arbitration Between Rita Vido and Robert Vido, Individually and as attorneys-in-fact of Theodore Wensink, Claimants, v. SunTrust Investment Services, Inc. and Ahmet Kildis a/k/a Matt Kildis, Respondents (FINRA Arbitration Award 20-02359) As characterized in the FINRA Arbitration Award:

[T]he causes of action related to Claimant's allegation that Kildis failed to change the payable on death beneficiary on one account despite Wensink having expressed a clear intent, prior to his passing, to make the Vidos the beneficiaries of the entirety of the assets held in all of his accounts, including the account ending in 8896 ("Subject Account").

Respondents generally denied the allegations and, additionally, Respondent Kildis asserted affirmative defenses and requested the expungement of the matter from his Central Registration Depository record ("CRD"). Respondent SunTrust advised the FINRA Arbitration Panel that it would abide by the determination as to the account's proper beneficiaries. 

As to the relief requested by Claimants, the FINRA Award asserts that they sought:

specific performance by honoring the beneficiary designation, reformation of the beneficiary designation on the Subject Account to reflect Wensink's true intent, or in the alternative, an award of compensatory damages in the amount of the highest balance the account could have had Claimants had controlled the account; punitive damages for gross negligence; disgorgement of all commissions and fees; pre-judgment interest; post-judgment interest; forum fees; costs; expert witness fees' attorneys' fees; and such other and further relief as the Panel deems just and proper.


The FINRA Arbitration Panel issued the following awards:

1. The Transfer on Death Beneficiaries for SunTrust account ending 8896 should be modified no later than thirty (30) days after the date of publication of this Award as follows: 

  • Sharon Vido and Bernard Vido shall be removed as Transfer on Death Beneficiaries; 
  • Robert Vido shall be deemed and inserted on the account documentation as a 50% Transfer on Death Beneficiary; 
  • Rita Vido shall be deemed and inserted on the account documentation as a 50% Transfer on Death Beneficiary; and 
  • SunTrust shall take actions necessary and appropriate to notify the Transfer on Death Beneficiaries of the change in beneficiary status and take such other actions as are necessary or proper to transfer the account ending in 8896 to Robert and Rita Vido as the Transfer on Death Beneficiaries. 

2. SunTrust and Kildis are jointly and severally liable for and shall pay to Claimants the sum of $18,207.45 in costs. 

3. SunTrust and Kildis are jointly and severally liable for and shall pay to Claimants the sum of $375.00 in costs as reimbursement for the non-refundable portion of the filing fee. 

4. Kildis's request for expungement of the above-captioned arbitration (Occurrence Number 2086926) from registration records maintained by the CRD is denied. 

5. Any and all claims for relief not specifically addressed herein, including any requests for punitive damages, treble damages, and attorneys' fees, are denied.

Bill Singer's Comment

Most of the TOD cases that I have reported about over the years involve an alleged failure by a decedent to implement purportedly promised beneficiary designations -- or, then again, who knows, maybe things were left the way that they were on purpose. Wouldn't be the first time that someone said one thing but did another. In some truly stunning lawsuits, it appears likely that a former, now-divorced spouse should have been removed as a joint tenant or beneficiary but for whatever reason, wasn't -- much to the chagrin for the current spouse or surviving children. Similarly, we come across lawsuits in which the servicing stockbroker pled with, cajoled, importuned, and otherwise did everything possible to get a client to sign the TOD paperwork but, alas, "not now" became "not ever."

In today's TOD dispute, the allegation by the Claimants was that the Deceased (Theodore Wensink) made it clear to Respondent Kildis that he wanted Rita and Robert Vidos named as TOD beneficiaries. As to why Kildis didn't process the TOD changes isn't explained in the Award. Similarly, there's not explanation as to why Sharon Vido and Bernard Vido got the heave-ho as TOD beneficiaries and were replaced by Rita Vido and Robert Vido -- nor do we know what the relationship was among the four Vidos or their relationship with Wensink. I wish that a few words of clarification were offered to us in the Award.

Transfers on Death ("TOD")

On the SEC's website, we are offered the following guidance:

Transfer on Death (TOD) Registration

Transfer on death (TOD) registration allows you to pass the securities you own directly to another person or entity upon your death without having to go through probate. By having a TOD registration, the executor or administrator of your estate will not have to take any action to ensure that your securities transfer to whomever you have designated.

However, TOD beneficiaries must take steps to re-register the securities in their names. This typically involves sending a copy of the death certificate and an application for re-registration to the transfer agent.

State law, rather than federal law, governs the way securities may be registered in the names of their owners. In addition, brokerage firms may decide whether or not to offer TOD registration.

For more information about TOD registration, please visit the website of the National Conference of Commissioners on Uniform State Laws. There you'll find a summary of the Uniform TOD Security Registration Act, explaining how TOD registration differs from joint ownership. You'll also find a list of the states that have adopted the Act and the full text of the Act.

The Nation Conference of Commissioners on Uniform State Laws provides at

This Act is a free-standing version of Part 3 of Article VI of the Uniform Probate Code, as adopted by the National Conference of Commissioners on Uniform State Laws in 1989. The purpose of the Act is to allow the owner of securities to register the title in transfer-on-death (TOD) form. Mutual fund shares and accounts maintained by brokers and others to reflect a customer's holdings of securities (so-called "street accounts") are also covered. The legislation enables an issuer, transfer agent, broker, or other such intermediary to transfer the securities directly to the designated transferee on the owner's death. Thus, TOD registration achieves for securities a certain parity with existing TOD and pay-on-death (POD) facilities for bank deposits and other assets passing at death outside the probate process. 

The TOD registration under this Act is designed to give the owner of securities who wishes to arrange for a nonprobate transfer at death an alternative to the frequently troublesome joint tenancy form of title. Because joint tenancy registration of securities normally entails a sharing of lifetime entitlement and control, it works satisfactorily only so long as the co-owners cooperate. Difficulties arise when co-owners fall into disagreement, or when one becomes afflicted or insolvent. 

Use of the TOD registration form encouraged by this legislation has no effect on the registered owner's full control of the affected security during his or her lifetime. A TOD designation and any beneficiary interest arising under the designation ends whenever the registered asset is transferred, or whenever the owner otherwise complies with the issuer's conditions for changing the title form of the investment. The Act recognizes, in Section 2, that co-owners with right of survivorship may be registered as owners together with a TOD beneficiary designated to take if the registration remains unchanged until the beneficiary survives the joint owners. In such a case, the survivor of the joint owners has full control of the asset and may change the registration form as he or she sees fit after the other's death. 

Implementation of the Act is wholly optional with issuers. The drafting committee received the benefit of considerable advice and assistance from representatives of the mutual fund and stock transfer industries during the course of its three years of preparatory work. Accordingly, it is believed that the Act takes full account of the practical requirements for efficient transfer within the securities industry. 

Section 3 invites application of the legislation to locally owned securities though the statute may not have been locally enacted, so long as the Act is in force in a jurisdiction of the issuer or transfer agent. Thus, if the principal jurisdictions in which securities issuers and transfer agents are sited enact the measure, its benefits will become generally available to persons domiciled in states that do not at once enact the statute. 

The legislation has been drafted as a separate Act, hence not interpolated as an expansion 2 of the former UPC Article VI, Part 1, treating bank accounts ("multiple-party accounts"). Securities merit a distinct statutory regime, because a different principle has governed concurrent ownership of securities. By virtue either of statute or of account terms (contract), multiple-party bank accounts allow any one cotenant to consume or transfer account balances. See R. Brown, The Law of Personal Property § 65, at 217 (2d ed. 1955); Langbein, The Nonprobate Revolution and the Future of the Law of Succession, 97 Harv. L. Rev. 1108, 1112 (1984). The rule for securities, however, has been the rule that applies to real property: all cotenants must act together in transferring the securities. This difference in the legal regime reflects differences in function among the types of assets. Multiple-party bank accounts typically arise as convenience accounts, to facilitate frequent small transactions, often on an agency basis (as when spouses or relatives share an account). Securities resemble real estate in that the values are typically large and the transactions relatively infrequent, which is why the legal regime requires the concurrence of all concurrent owners for transfers affecting such assets. 

Recently, of course, this distinction between bank accounts and securities has begun to crumble. Banks are offering certificates of deposit of large value under the same account forms that were devised for low-value convenience accounts. Meanwhile, brokerage houses with their so-called cash management accounts and mutual funds with their money market accounts have rendered securities subject to small recurrent transactions. In the latest developments, even the line between real estate and bank accounts is becoming indistinct, as the "home equity line of credit" creates a check-writing conduit to real estate values. 

Nevertheless, even though new forms of contract have rendered the boundaries between securities and bank accounts less firm, the distinction seems intuitively correct for statutory default rules. True co-owners of securities, like owners of realty, should act together in transferring the asset. 

The joint bank account and the Totten trust originated in ambiguous lifetime ownership forms, which required former UPC Section 6-103 or comparable state legislation to clarify that an inter vivos transfer was not intended. In the securities field, by contrast, we start with unambiguous lifetime ownership rules. The sole purpose of the present statute is to facilitate a nonprobate TOD mechanism as an option for those owners. 

For a comprehensive discussion of the issues entailed in this legislation, see Wellman, Transfer-on-Death Securities Registration: A New Title Form, 21 Ga. L. Rev. 789 (1987).

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