My Dad Died Owning Stocks – What a Pain That Was!

April 1, 2014

Filed under: Financial,Probate — Alexis @ 10:18 AM

If you have ever had to deal with stocks that you inherited, then you know what a pain it can be to change ownership over to your name.

You probably had to:

  • Figure out which stock transfer agent was managing those shares (ex. Computershare),
  • Figure out which forms that transfer agent needed you to fill out,
  • Go to your local bank to obtain a “medallion stamp signature guarantee” (and there is usually one person per region authorized to make that stamp, so you had to wait until the day that person was in your local branch),
  • Mail those forms to the transfer agent,
  • Wait for proof of your new ownership to arrive,
  • Find the value of the stocks on the date of death,
  • Find the value of the stocks on the date they were transferred to you, and
  • Report those last two items to the probate court.

What a pain!

Consider sparing your family such a headache.  If you own individual stocks, take action now to help your family out later.  For most people, listing family members as “beneficiaries” or “payable on death to” will do the trick.  You do this by: (1) figuring out which stock transfer agent manages your stocks, and (2) downloading appropriate forms from their website, completing them, and mailing them in.

For example, if you have a spouse and three children, then in most cases, you would name your spouse as the first beneficiary, and in case she predeceases you, name your three children as equal beneficiaries in the second position.  When you die, your spouse, or your children, if your spouse doesn’t survive you, will download the appropriate forms from the stock transfer agent’s website, mail those in along with a death certificate, and the transfer agent will send out proof that the beneficiaries are the new owners of the stocks (or a check, if the beneficiaries prefer).

That’s it.  No chasing down the manager at your local bank for a signature, no reporting to the probate court.  Just a few forms in the mail.

A caveat: If you have a taxable estate, a special needs child, predeceased children, children who don’t speak to you, or anything else that makes your situation unique, then adding beneficiaries to stocks without professional guidance may not be a good idea.  If you have any unique situation, then speak with an elder law or estate planning attorney before changing your stocks.  In addition, if you have met with an attorney who has crafted an estate plan for you, then check with her on whether to name beneficiaries.  But for most people, adding family as beneficiaries is the right thing to do.

Whatever you do, don’t add other people as joint owners on your stocks!  See this post for why that approach can cause a lot of problems.  It’s rarely a good idea.

A little work by you now will save your family a lot of work later. And if you need help determining whether and what to do with your stocks, please let us know.