Jointly owned stock and brokerage accounts sometimes can pass to the surviving owner without having to go through probate. Three types of joint ownership exist. Depending upon the type, a surviving owner could sell the stock easily by presenting a death certificate to the broker and having his signature validated or guaranteed.
Types of Joint Ownership
Joint ownership can be as joint tenancy with right of survivorship, tenancy in its entirety or tenants in common. In JTWROS, the entire stock passes automatically to the survivor. Joint tenancy between spouses often is known as tenancy in its entirety, which is treated differently for tax purposes. When stock is owned as tenants in common, the deceased's share does not pass automatically to the other owner. It becomes part of the estate and must be probated. Only in JTWROS or tenancy in entirety may the surviving owner sell the stock without probate.
Even though the stock may pass automatically to a surviving owner through JTWROS or tenancy in entirety, the surviving owner must go through a process to change ownership before she can sell the stock. The process varies slightly depending on whether the owners held stock certificates or the stock was held in a brokerage account.
Brokerage or Mutual Fund Account
For JOWROS or tenancy in entirety, the surviving owner of a brokerage account or mutual fund account will contact the brokerage or mutual fund. Typically, the surviving owner will be asked to complete and submit a form -- along with a death certificate -- to the company, allowing it to re-register the account in the name of the surviving owner. Some companies may ask that the surviving owner's signature be verified or guaranteed.
If the stock was held as actual certificates, they must be re-issued in the surviving owner's name. If the stock is publicly traded, you'll find the name of the corporation's transfer agent on the back of the certificate. Otherwise, you'll have to deal directly with the company, according to Nolo.com.
Stock passing to a survivor automatically doesn't avoid taxes. If the value of the stock and other assets passing to the survivor total more than $5.2 million, estate taxes could apply. You may also have to pay a capital gains tax on the increased value of the stock when it is sold.
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