§560:2-706 - Life insurance; retirement plan; transfer-on-death registration; deceased beneficiary.

§560:2-706 Life insurance; retirement plan;
transfer-on-death registration; deceased beneficiary. (a) Definitions.
In this section:

"Alternative beneficiary designation"
means a beneficiary designation that is expressly created by the governing
instrument and, under the terms of the governing instrument, can take effect
instead of another beneficiary designation on the happening of one or more
events, including survival of the decedent or failure to survive the decedent,
whether an event is expressed in condition-precedent, condition-subsequent, or
any other form.

"Beneficiary" means the beneficiary
of a beneficiary designation under which the beneficiary must survive the
decedent and includes:

(1) A class member if the beneficiary designation is
in the form of a class gift; and

(2) An individual or class member who was deceased at
the time the beneficiary designation was executed as well as an individual or
class member who was then living but who failed to survive the decedent, but
excludes a joint tenant of a joint tenancy with the right of survivorship and a
party to a joint and survivorship account.

"Beneficiary designation" includes an
alternative beneficiary designation and a beneficiary designation in the form
of a class gift.

"Class member" includes an individual
who fails to survive the decedent but who would have taken under a beneficiary
designation in the form of a class gift had the individual survived the
decedent.

"Stepchild" means a child of the
decedent's surviving, deceased, or former spouse, and not of the decedent.

"Surviving beneficiary" or
"surviving descendant" means a beneficiary or a descendant who
neither predeceased the decedent nor is deemed to have predeceased the decedent
under section 560:2-702.

(b) Substitute gift. If a beneficiary fails
to survive the decedent and is a grandparent, a descendant of a grandparent, or
a stepchild of the decedent, the following apply:

(1) Except as provided in paragraph (4), if the
beneficiary designation is not in the form of a class gift and the deceased
beneficiary leaves surviving descendants, a substitute gift is created in the
beneficiary's surviving descendants. They take by representation the property
to which the beneficiary would have been entitled had the beneficiary survived
the decedent;

(2) Except as provided in paragraph (4), if the
beneficiary designation is in the form of a class gift, other than a
beneficiary designation to "issue", "descendants",
"heirs of the body", "heirs", "next of kin",
"relatives", or "family", or a class described by language
of similar import, a substitute gift is created in the surviving descendants of
any deceased beneficiary. The property to which the beneficiaries would have
been entitled had all of them survived the decedent passes to the surviving
beneficiaries and the surviving descendants of the deceased beneficiaries.
Each surviving beneficiary takes the share to which the surviving beneficiary
would have been entitled had the deceased beneficiaries survived the decedent.
Each deceased beneficiary's surviving descendants who are substituted for the
deceased beneficiary take by representation the share to which the deceased
beneficiary would have been entitled had the deceased beneficiary survived the
decedent. For the purposes of this paragraph, "deceased beneficiary"
means a class member who failed to survive the decedent and left one or more
surviving descendants;

(3) For the purposes of section 560:2-701, words of
survivorship, such as in a beneficiary designation to an individual "if he
survives me", or in a beneficiary designation to "my surviving
children", are not, in the absence of additional evidence, a sufficient
indication of an intent contrary to the application of this section; and

(4) If a governing instrument creates an alternative
beneficiary designation with respect to a beneficiary designation for which a
substitute gift is created by paragraph (1) or (2), the substitute gift is
superseded by the alternative beneficiary designation only if an expressly
designated beneficiary of the alternative beneficiary designation is entitled
to take.

(c) More than one substitute gift; which one
takes. If, under subsection (b), substitute gifts are created and not
superseded with respect to more than one beneficiary designation and the
beneficiary designations are alternative beneficiary designations, one to the
other, the determination of which of the substitute gifts takes effect is
resolved as follows:

(1) Except as provided in paragraph (2), the property
passes under the primary substitute gift;

(2) If there is a younger-generation beneficiary
designation, the property passes under the younger-generation substitute gift
and not under the primary substitute gift;

(3) In this subsection:

"Primary beneficiary designation"
means the beneficiary designation that would have taken effect had all the
deceased beneficiaries of the alternative beneficiary designations who left
surviving descendants survived the decedent.

"Primary substitute gift" means the
substitute gift created with respect to the primary beneficiary designation.

"Younger-generation beneficiary
designation" means a beneficiary designation that:

(A) Is to a descendant of a beneficiary of the
primary beneficiary designation;

(B) Is an alternative beneficiary designation
with respect to the primary beneficiary designation;

(D) Would have taken effect had all the
deceased beneficiaries who left surviving descendants survived the decedent
except the deceased beneficiary or beneficiaries of the primary beneficiary
designation.

"Younger-generation substitute
gift" means the substitute gift created with respect to the
younger-generation beneficiary designation.

(d) Protection of payors.

(1) A payor is protected from liability in making
payments under the terms of the beneficiary designation until the payor has
received written notice of a claim to a substitute gift under this section.
Payment made before the receipt of written notice of a claim to a substitute
gift under this section discharges the payor, but not the recipient, from all
claims for the amounts paid. A payor is liable for a payment made after the
payor has received written notice of the claim. A recipient is liable for a
payment received, whether or not written notice of the claim is given;

(2) The written notice of the claim shall be mailed
to the payor's main office or home by registered or certified mail, return
receipt requested, or served upon the payor in the same manner as a summons in
a civil action. Upon receipt of written notice of the claim, a payor may pay
any amount owed by it to the court having jurisdiction of the probate
proceedings relating to the decedent's estate or, if no proceedings have been
commenced, to the court having jurisdiction of probate proceedings relating to
decedents' estates located in the judicial circuit of the decedent's
residence. The court shall hold the funds and, upon its determination under
this section, shall order disbursement in accordance with the determination.
Payment made to the court discharges the payor from all claims for the amounts
paid.

(e) Protection of bona fide purchasers;
personal liability of recipient.

(1) A person who purchases property for value and
without notice, or who receives a payment or other item of property in partial
or full satisfaction of a legally enforceable obligation, is neither obligated
under this section to return the payment, item of property, or benefit nor is
liable under this section for the amount of the payment or the value of the
item of property or benefit. But a person who, not for value, receives a
payment, item of property, or any other benefit to which the person is not
entitled under this section is obligated to return the payment, item of
property, or benefit, or is personally liable for the amount of the payment or
the value of the item of property or benefit, to the person who is entitled to
it under this section;

(2) If this section or any part of this section is
preempted by federal law with respect to a payment, an item of property, or any
other benefit covered by this section, a person who, not for value, receives
the payment, item of property, or any other benefit to which the person is not
entitled under this section is obligated to return the payment, item of
property, or benefit, or is personally liable for the amount of the payment or
the value of the item of property or benefit, to the person who would have been
entitled to it were this section or part of this section not preempted.

(f) This section shall not apply to
payable-on-death accounts established at a financial institution. The payment
of payable-on-death accounts shall be governed by section 560:6-110. [L 1996, c
288, pt of §1; am L 2008, c 39, §1]