Succession of Schimek: TOD Beneficiary Dispute Clarifies Louisiana Law

In Succession of Schimek, the Louisiana Fourth Circuit Court of Appeal addressed whether securities accounts designated as Transfer on Death (TOD) assets could bypass Louisiana’s forced heirship and succession laws. The case involved a dispute over brokerage accounts held by the late Robert Alfred Schimek, Sr., and whether his designated TOD beneficiaries could receive the funds outside the probate process.

The Core Dispute: Validity of TOD Designations

Following Schimek’s death in 2018, his co-executors filed a petition seeking to declare TOD designations on his securities accounts invalid under Louisiana law. They argued that Louisiana’s succession laws required assets to be distributed according to the decedent’s will, rather than passing directly to named TOD beneficiaries.

At the center of the dispute were two brokerage accounts held with Vanguard and TD Ameritrade, which designated Schimek’s son, Robert Schimek, Jr., and his surviving spouse as equal beneficiaries. The co-executors contended that Louisiana law did not explicitly authorize TOD transfers for securities accounts and that such designations violated public policy.

The Court’s Ruling: Pennsylvania Law Governs the TOD Accounts

The district court ruled in favor of Robert Schimek, Jr., upholding the TOD designations as valid under the contracts governing the brokerage accounts. The court reasoned that:

• The Vanguard agreement explicitly applied Pennsylvania law, which recognizes TOD designations for securities accounts.
• Louisiana law does not expressly prohibit TOD transfers, and similar mechanisms exist for retirement accounts and life insurance policies.
• The funds in the Vanguard account had already been distributed to the designated beneficiaries, making a reversal of the transaction impractical.

On appeal, the Fourth Circuit affirmed the lower court’s decision, concluding that the TOD designations were enforceable as contractual agreements under Pennsylvania law, which was validly chosen in the brokerage agreements.

What This Decision Means for Estate Planning in Louisiana

This case provides significant guidance on the enforceability of TOD designations in Louisiana succession law. While Louisiana succession law generally requires assets to pass through probate, the ruling confirms that out-of-state brokerage accounts governed by foreign law can transfer assets through TOD agreements.

Key takeaways for estate planning:

• Individuals holding brokerage accounts with TOD designations should ensure that the governing law aligns with their estate planning goals.
• Louisiana residents may still need to navigate community property laws and forced heirship claims, which can affect how certain assets are distributed.
• Courts may continue to uphold TOD transfers if the brokerage agreement selects another state’s laws and no direct Louisiana statute prohibits them.

Navigating Estate Planning and Succession Laws

If you are handling a succession dispute or need guidance on estate planning, legal advice can help clarify how TOD designations and other nonprobate transfers impact asset distribution. At Whitcomb, Selinsky, PC, we assist clients in navigating estate planning complexities and ensuring their wishes are legally protected. Contact us to discuss your estate planning or succession concerns.