BATON ROUGE, La. – The Louisiana Credit Union League is backing two bills that are moving through the state's legislature.
On Tuesday, thanks in part to the combined efforts of the LCUL and Louisiana credit unions, the state House of Representatives overwhelmingly passed the two bills.
A measure supporting prized-linked savings passed unanimously, 91-0, while legislation updating the terms relating to deposits payable upon death passed by a vote of 89-9.
With both measures passed by the Louisiana House, they go to the state Senate for hearings.
The LCUL has retained lobbyist Adams & Reese to support the two bills, which it helped draft. The league thanked credit unions and their members for reaching out to their representatives and encouraging them to support the legislation.
Background on Bills
In 2009, the Michigan Credit Union League and others launched a successful prize-linked savings program, Save to Win. Since then, numerous other state CU leagues have launched their own efforts to get their legislatures to legalize similar programs, which are approved in 16 states.
The LCUL said individual credit unions would be able to decide if they want to offer a prize-linked savings program if the bill is made law.
According to the LCUL, credit union members' past and current account opening documents likely contain an option to designate an account as Payable on Death (POD). A POD account allocates funds in the account to a designated beneficiary upon the account owner's death. Louisiana law allows account owners to designate a POD beneficiary that, if issued correctly with an affidavit, overrides provisions in a will or other inheritance document.
This beneficiary does not necessarily have to be related to the account holder. To create a POD account, the account holder must provide an affidavit to the credit union naming the account beneficiary upon his or her death in order to protect credit unions from claims made by any person when the funds in the POD account are distributed.
For a POD designation to be valid, members must have a notarized affidavit signed by two witnesses. Oftentimes, the LCUL said, credit unions accept designated POD accounts without securing the affidavit, therefore making the designation invalid. The league said this problem typically is not identified until after a member has died, leaving the credit union unsure of the intended beneficiary of the account. As a result, credit unions could ultimately distribute the POD account funds to the wrong person – exposing the credit union to litigation and paying the funds again to the proper party.
The league-sponsored bill will no longer require credit union members to secure an affidavit to create a POD account. The LCUL noted Louisiana is the only state requiring an affidavit for a designated POD account at credit unions, which it argued places an "undue burden" on CUs.
"We serve to help make our members' financial lives easier during the times when they need it the most, and eliminating the affidavit requirement will accomplish just that," the league said.
