Stocks & Probate
Stocks can be held in an individual’s name or more commonly in “street name.” For example, a person has an account with Schwab and if they buy, for example, 1000 shares of Ford, the car company, they never see a certificate for the 1000 shares, all they see are monthly statements from Schwab showing that they own 1000 shares of Ford. This is known as having the stock in the “street name.”
Old Style Stock Certificates
Back in the “old days,” if someone bought, for example 1000 shares of Ford, they got an expensively printed certificate for 1000 shares of Ford. This certificate was like a car title. Although the shares would have to be sold through a stock broker, the seller would sign the back of the certificate and deliver it to the stockbroker.
Occasionally when we do a probate our client brings in a bunch of old style stock certificates, often for companies not now in business, but for companies which may have been bought out by another company. Do these certificates have value? What we do in this case is either have the client take them to a stockbroker they do business with our take them to a stockbroker we know and ask them to check the certificates out.
More commonly, though, our probate clients bring in a statement showing that the Deceased owned various stocks. The company holding these stocks could be a stock brokerage company like Schwab, or the investment arm of a bank such as Wells Fargo. When the person has all their stocks in one account, it is easier for the Executor or Administrator to deal with.
But sometimes a person will own one or more stocks in various special accounts. For example, some publicly held companies offer a program whereby if the company holds the stock for the individual, all dividends will be re-invested at a discount, say 5%. So, the person lets, for example, Johnson & Johnson hold their Johnson & Johnson stock to take advantage of that program. Or a person retires from a company holding shares of the company, doesn’t have a regular stock brokerage account, and keeps the stocks in account managed by Compushare or some similar company.
So, when doing the probate, the more different institutions holding shares owned by the Deceased, the more of a task it is for the Executor or Administrator.
Getting Shares Or Money Out of An Institution & Gold Medallion Signatures
(JUST TO BE CLEAR: ONLY BANKS CAN GIVE GOLD MEDALLION SIGNATURES. IF A GOOGLE SEARCH FOR GOLD MEDALLION SIGNATURES LEAD YOU TO THIS PAGE, THIS IS JUST A DISCUSSION OF THE PROBLEM, NOT AN OFFER TO GET YOU A GOLD MEDALLION SIGNATURE.)
Some institutions demand a Gold Medallion Signature guarantee. This is a service which banks once provided fairly freely to their customers, or to a law firm's clients, if the law firm banked with the bank. However, increasingly, banks refuse to give Gold Medallion Signature guarantees. IT IS IMPORTANT TO REALIZE THAT REQUIRING A GOLD MEDALLION SIGNATURE IS NOT A LEGAL REQUIREMENT. IT IS SOMETHING THAT SOME EXCESSIVELY CAUTIOUS PERSON THOUGHT IT WOULD BE A GOOD IDEA TO DEMAND. IF YOU WORK FOR A FINANCIAL INSTITUTION IT IS EASIER TO GET FIRED FOR RISKING SOME LIABILITY THAN IT IS FOR WASTING THE TIME OF CUSTOMERS.
AT REED & MANSFIELD WE HAVE DECIDED THAT GOING FORWARD FROM THE FALL OF 2023 WE WILL START PUTTING IN PROBATE PETITIONS A REQUEST THAT THE ORDER SETTING UP THE PROBATE REQUIRES THAT FINANCIAL INSTITUTIONS HONOR REQUESTS FROM THE COURT APPOINTED PERSONAL REPRESENTATIVE WITHOUT THE NECESSITY OF THE PERSONAL REPRESENTATIVE GETTING A GOLD MEDALLION SIGNATURE.
IF A FINANCIAL INSTITUTION DEMANDS A GOLD MEDALLION SIGNATURE AND OUR CLIENT CAN'T GET ONE AND WE DIDN'T GET A NO GOLD MEDALLION SIGNATURE REQUIRED CLAUSE IN THE ORDER WE GOT, WE CAN PETITION THE COURT TO DEMAND THAT THE FINANCIAL INSTITUTION NOT REQUIRE A GOLD MEDALLION SIGNATURE.
Getting the shares (or the money the shares are worth) out of an institution is typically a chore. The institution may require a Gold Medallion Signature. Banks offer this service but banks have some liability in doing a Gold Medallion Signature and generally will offer this service only for their own customers. If a Gold Medallion Signature is required it will usually be required of all personal representatives. (A personal representative can be the Executor which is a person named in a Will and usually there is only one Executor, or it can be an Administrator because no one was named in the will and sometimes there are two or three Co-Administrators, especially as Nevada requires an out of state Administrator to have a Nevada resident Co-Administrator.)
In addition to the hassle of a Gold Medallion Signature, some banks and other institutions are demanding that the Letters Testamentary or Letters of Administration (issued by the Court to an Executor or Administrator) be presented to them no more than 60 days after the Court issued them. Thus, it may at times be necessary to get Letters re-issued or to get new copies of the Letters. When this happens it is easier to get the Letters re-issued than it is to fight with the financial institution. Our clients can time and hassles by demanding funds from the accounts of the deceased person as soon as they are issued Letters.
Stock held by Computershare
Computershare manages the divident re-investment programs of many big publicly traded corporations. Because of "dollar cost averaging" re-investing dividents makes sense. (Suppose a company pays a $1 dividend four times a year and over the year the share price ranges from $50 to $100. When the $1 divident is used to buy more stock when the price is $100/share, the account only increases by 1/100 of a share. But when the share is $50, the dividend reinvestment increases the account by 1/50 of a share. So over time this is a "buy more when the price is low strategy.") Add to this the fact that the company dividend reinvestment plan may give a 5% discount on the divident reinvestment purchases and the plan seems like a great winner.
BUT Computershare markets itself to publicly traded corporations, not to consumers. Many of my clients have found dealing with Computershare very difficult when they are appointed Executor or Administrator.
At the present time many consumer friendly stock brokerage companies, such as Schwab, offer investors automatic re-investment of dividends without charging a commission, but unfortunately, without a discount.
Our Estate Planning Advice on How to Hold Stocks
To make matters easier for your heirs, we advise that you hold all of your stocks in one account (or a few accounts if you have a lot of money in stocks and want some diversification) and at least name your trust as the secondary beneficiary of the account(s) or simply hold the accounts in the name of your trust.