Few life events are more stressful than dealing with the loss of close family members, especially parents. At a time of grieving, unfortunately, there are certain financial matters that need your attention, too.
Transferring brokerage accounts is one of those matters.
Fortunately, a new FINRA hotline is offering help to stressed folks who are trying to sort out the assets left behind by parents.
A recent article by ThinkAdvisor, titled “4 Steps to Transfer Deceased Parents’ Brokerage Assets: FINRA,” provides some practical pointers.
For example, beneficiaries should talk to the financial advisor of their parents, if he or she is still available.
The typical procedure for brokerages is to attempt to place beneficiaries in touch with the financial advisor right away.
Typically, such advisors will be most familiar with the investments and portfolio of the deceased parents.
The article notes that many seniors may share their estate planning strategies with their children, but they may forget to share details regarding the transfer of securities that are in non-retirement brokerage accounts.
Consequently, family members and other beneficiaries need to be prepared.
Here are four tasks suggested in the original article:
1. Find All of the Right Documents.
For starters, brokerages will need a death certificate.
After that, depending on the unique circumstances and the state where your parents lived, you may need a letter of appointment by a court appointing you as the executor, a “stock power” of attorney, a state tax inheritance waiver, an affidavit of domicile, or even a certification of trust regarding any accounts held in trust.
Yes, it can become a goat rope.
2. Call the Broker ASAP.
This important person in the financial life of your parents is your ally.
When an account holder (the parent) dies, you need to contact the brokerage right away. In a worst case scenario you will need to search for account statements among their (stacks of) paperwork (to include unopened mail) left behind by your folks.
You may not even be aware that a given account even exists!
3. Know How The Holdings Work.
If you can, have a very candid conversation with your folks about their financial holdings.
You will want to know the assets in play, review account statements, and perhaps see trade confirmations.
The ownership structure is also something to think about.
Asset transfers can be significantly impacted based on whether an account is for an individual owner or for joint tenants.
4. Be Ready To Open a New Account.
After a death, a new account is typically opened for the beneficiary or estate. Any transactions or transfers within the account cannot be executed until everything is "legal" and the new account is set up.
By the way, depending on the "customer care" you experience, this may be a perfect time to see if the current firm and broker are a good fit for you.
If the total value of all brokerage accounts (and there is no real estate subject to probate) and other "accounts" are below $40,000 in Kansas or Missouri, then you may be able to inherit such assets without opening a "probate" case via a Small Estate Affidavit.
This is a little known, but highly valuable method to transfer title.
The original article also encourages beneficiaries to explore whether a transfer on death (TOD) arrangement is available through the brokerage.
Benefit: if you create a TOD arrangement for your account, then you can keep control of the brokerage account assets during your lifetime and upon your death the ownership automatically passes to the named beneficiaries without probate.
However, there are even downsides to TOD arrangements.
Be sure to discuss your options regarding brokerage accounts with your estate planning attorney.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit my estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: ThinkAdvisor (June 26, 2015) “4 Steps to Transfer Deceased Parents’ Brokerage Assets: FINRA”