Only two months after launching a helpline for seniors, FINRA has received a number of calls from stressed family members with questions about the transfer of brokerage account assets upon death, so it has released an extensive investor alert dealing with the issue. Since the Financial Industry Regulatory Authority introduced the Securities Helpline for Seniors on April 20, FINRA has received more than 600 phone calls on a variety of themes, according to spokeswoman Michelle Ong. But many of those calls came from adult children of deceased parents who were trying to track down their parents’ broker-dealer account assets, Ong added. As a result, she said, FINRA on June 17 released an investor alert, “Plan for Transition: What You Should Know About the Transfer of Brokerage Account Assets on Death.”
“It’s important to get the word out about this helpline because it’s such a valuable resource,” Ong said in an article by ThinkAdvisor, “4 Steps to Transfer Deceased Parents’ Brokerage Assets: FINRA.”
Beneficiaries should talk to the deceased’s financial advisor if available. The typical procedure for brokerages is to attempt to put beneficiaries in touch with the financial advisor right away. Advisors will be familiar with the parents’ investments and portfolio.
The article also points out that even though there are many seniors who share their estate planning strategies with their children, they may forget about the transfer of securities that are in a non-retirement brokerage account. Family members and other beneficiaries need to be prepared. These four tasks are recommended:
1. Find All of the Right Documents. Brokerages will need a death certificate, the court’s letter of appointment naming the personal representative, a “stock power” of attorney, a state tax inheritance waiver, an affidavit of domicile, as well as a trustee certification for accounts that are held in trust.
2. Call the Broker ASAP. When an account holder (the parent) dies, you need to contact the brokerage right away. Watch for account statements—you may not even be aware that an account exists!
3. Know How The Holdings Work. It’s best to have a candid conversation before a death to know the account holders’ assets, review account statements, and trade confirmations. The ownership structure is also something to think about, as asset transfers are impacted based on whether an account is for an individual owner or 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 can’t be completed until everything is legal, and the new account gets set up. It’s also the perfect time to see if the current firm and broker are a good fit.
Depending on the size of the brokerage accounts and its value, some states' law may provide for a Small Estate Affidavit to transfer the account without opening a probate. (Not Florida.)
The article urges beneficiaries to explore if there’s a transfer on death plan (TOD) available through the brokerage. If you create a TOD arrangement for your account, then you keep control of the brokerage account assets during your lifetime, and when you pass away, the ownership goes to the named beneficiaries without probate.
If it is time to discuss your options regarding brokerage accounts with your estate planning attorney, consider scheduling a consultation, or visit my website.
Reference: ThinkAdvisor (June 26, 2015) “4 Steps to Transfer Deceased Parents’ Brokerage Assets: FINRA”