Specific procedures must be followed to transfer ownership of stock when someone dies. The exact steps vary depending on how the shares were held. In addition, if the shares are part of an estate’s assets that must be probated, the executor or administrator of the estate must carry out the actual transfer of ownership.
The deceased may have held shares as physical stock certificates registered with the transfer agent that handles securities transactions for the company that issued the shares. Shares may also be registered and held in an account with the transfer agent. Stocks registered with a transfer agent normally must go through probate court before legal ownership can be transferred. Alternatively, stocks can be held in an account with a brokerage firm. In this case, the brokerage firm can process the ownership transfer. There is one exception. If you are the joint owner of an account with someone who died and you have right of survivorship, you become sole owner of the shares on the date of death. No transfer of ownership is necessary.
When you are the beneficiary of an account at a brokerage firm or similar financial institution, contact the broker to transfer the shares. Provide a copy of the death certificate and proof of your identity. The brokerage firm will process the transfer of ownership and notify you when the shares are registered to you. Some transfer agents offer a beneficiary option to clients that works the same way. If that isn’t the case, you cannot transfer legal ownership of the stocks and they will have to go through probate.
When shares are registered with a transfer agent and must be probated, the executor of the estate is responsible for transferring ownership unless the shares must be sold to pay creditors or sale is stipulated by the terms of the will. Once the probate court has reviewed the estate, the executor is given a letter authorizing her to act as the decedent’s representative. This letter is one of several documents that must be sent to the transfer agent.
After receiving authorization to proceed by the probate court, the executor obtains a transfer of ownership form from the transfer agent. He takes this form and paper stock certificates, if any, to a bank or other financial institution empowered to issue a Medallion Signature Guarantee. The bank representative witnesses the executor’s signature on the transfer of ownership form and on the form on the back of stock certificates. A Medallion Signature Guarantee is required because transfer agents will not accept a notary’s seal except for small amounts of stock. Once everything is witnessed, the executor sends the transfer of ownership form, a copy of his authorization letter and the stock certificates to the transfer agent via certified mail. A copy of the will or a statement from the probate court identifying the person entitled to the shares must be included. The transfer agent then transfers ownership of the stocks.