When a decedent passes away with stock holdings, these assets can be found in various forms, such as brokerage accounts, direct registration, or physical stock certificates. As the fiduciary, it is your responsibility to gain control of these stocks to either liquidate them or transfer them to the beneficiaries. Here’s how to navigate each situation effectively.
1. Transferring Stocks in a Brokerage Account
The first step in dealing with stocks held in a brokerage account is to contact the brokerage firm to notify them of the decedent’s passing and inform them of your role as the fiduciary. At this point, it’s advisable to request a final statement of the brokerage account dated as close to the date of death as possible. This statement will be essential for probate court filings and can help clarify the estate’s assets.
Once you notify the brokerage, they will usually ask you to complete a form to retitle the account in the estate’s name. This process may also involve submitting other documentation, such as a death certificate or Letters of Authority. Sometimes, the brokerage might require a Medallion Signature Guarantee—a special certification that authenticates your signature and verifies that you have the authority to make the transfer. This certification is generally obtained from financial institutions like banks or credit unions.
After submitting the necessary forms and any required certification, the brokerage will process your request. You will then receive a notification, typically in the form of a letter or an email, confirming that the estate account has been created. It’s crucial at this stage to review the new account to ensure that all the stocks from the original account are present.
At this point, you have two main options: you can either sell the stocks and transfer the proceeds to the estate account or transfer the stocks directly to the beneficiaries. If you choose to transfer the stocks, the process is usually done on a “pull” basis, where the receiving institution (the beneficiary’s brokerage) collects the necessary information and initiates the transfer. For estates with multiple beneficiaries, some brokerage firms provide forms to create new accounts in the name of each recipient, although the availability of this option varies by institution.
2. Direct Registration of Stocks (Transfer Agent)
In some cases, a decedent may own stocks directly with the issuing company rather than through a brokerage account. These stocks are managed by transfer agents, which are companies that keep records of all shareholders. The largest transfer agents include Computershare and EQ (Equiniti) Shareholder Services.
Before initiating the transfer process with a transfer agent, it is vital to gather the decedent’s account number and the number of shares for each company. This information can typically be found on account statements or dividend checks. If the account number is unknown, you can call the transfer agent and request the latest statement, which will be sent to the decedent’s last known address. If you do not have access to mail at this address, you can send a letter to the transfer agent, enclosing your Letters of Authority, to request that the statement be mailed to your address instead. This procedure must be repeated for each company in which the decedent owned stock.
Once you have obtained the necessary information, you will need to fill out and submit the transfer agent’s forms to retitle the stocks in the name of the estate. After processing, the transfer agent will send a statement listing the stocks in the estate’s fiduciary’s name. From there, you can choose to either sell the stocks or transfer them to the beneficiaries.
If you decide to transfer the stocks, the transfer agent will provide a form that allows the distribution of shares to one or more recipients. Make sure to designate the transfer purpose as “inheritance” or similar so that the correct basis for the stock (the date-of-death value) is recorded.
3. Stocks in Certificated Form
In years past, stock ownership was often represented by physical certificates, and occasionally, a decedent may still have these certificates. The easiest way to manage these certificated stocks is to open a new account in the estate’s name with a brokerage and arrange to deposit the certificates into this account. Before proceeding, however, it’s important to verify with the brokerage whether the certificates are still valid. In some cases, they may have been reported lost and reissued, which could complicate the process.
Tax Considerations
An important aspect to consider when dealing with stocks in probate is the tax implications. When liquidating stocks, the estate should be aware that while the stock’s basis is “stepped-up” to its value on the date of the decedent’s death, any appreciation in value since that date may result in capital gains tax. On the other hand, if the stocks are transferred directly to the beneficiaries, there is no taxable event, and therefore, no taxes will be due at the time of transfer.
In summary, handling stock transfers in probate involves careful attention to details, whether the stocks are held in a brokerage account, directly registered, or in certificate form. Being aware of the specific steps for each scenario and considering the potential tax implications can help ensure a smooth transfer process for the beneficiaries.
Conclusion
Transferring stocks in probate can be a complex process. requiring attention to detail in navigating the labyrinth of procedure set forth by the financial institutions and transfer agents. It is equally important to consider the tax implications of each action—whether to sell the stocks or transfer them directly to beneficiaries. By understanding the unique requirements of each type of stock holding and completing the necessary forms and certifications, you can facilitate a smooth transition of these assets and fulfill your fiduciary duties efficiently.
Need help with your Ohio probate case? We offer a FREE 15-minute phone consultation with an attorney to discuss what we need to do to open your probate estate. Book a Consultation on our live calendar today or call us at 216-352-4243, let us know your situation, and we’ll get started right away.
Christian Carson
Christian Carson is the founding attorney of Carson Law Firm LLC in Cleveland, Ohio. He holds degrees in law and accountancy from Case Western Reserve University. With a strong background in accounting and finance, Christian focuses on real estate, probate, and business law. He is committed to providing practical legal solutions for individuals and small business owners.
