Retitling publicly traded securities (registered stocks or bonds) is often a necessary part of estate planning and administration. When a person establishes a living trust, their securities are often transferred into the name of the trustee. When a person dies owning securities in their name and a probate is required the securities are transferred into the name of the personal representative, who either sells them or later distributes them to the beneficiaries. How securities are retitled depends on how ownership is held and whether a brokerage account is already being, or will be, used to hold title to the securities.
Securities can be held in certificate form, book-entry form, or in “street name” with a brokerage. Traditionally, securities were held in paper certificate form bearing the name of the company, number of shares and type (e.g., common or preferred stocks), and a certificate serial number.
Securities are usually held in “street name” in a brokerage account. Securities can also be held in book entry form by the company itself maintaining the shareholder ownership records, such as in the case of a, “dividends reinvestment program” (“DRIP”) stock account.
If securities are held in paper certificate form the original certificate, along with other documents, must be sent to the issuing corporation for reissuance in the transferee’s name if the goal is to reissue the certificates in the name of the new transferee.
The process of reissuance of paper certificates in the name of new transferee requires that an authorized person endorse the assignment. Endorsement means either signing the endorsement provision on the back of the paper certificate or signing a separate stock power (assignment). To be effective, the signature must be certified by a medallion guarantee stamp at a commercial bank or brokerage where the client has an account and which participates in the medallion program.
The original certificate and the signed endorsement, with its medallion guarantee stamp, are mailed to the appropriate transfer agent with a letter of instructions. The corporation itself can identify whom they use as their transfer agent (e.g., computershares.com).
In addition, the submitted documents will, in the case of a transfer to a trust, also include either a notarized certificate of trust (signed by the trustee) or, in the case of a transfer to a personal representative (in a probate), also include either letters testamentary or letters of administration, issued by the court within 60 days of use, as relevant. These documents show the authority of the trustee or personal representative to transfer the securities.
Furthermore, a death certificate (if the existing owner is deceased) and a so-called, “letter of instruction” — with supplemental information for the transfer agent to process the transfer of title, such as the transferee’s taxpayer identification number and mailing address — are also included.
If the securities are already held in a brokerage account, then the brokerage house must be contacted in order to request their own packet of forms to transfer assets held in an existing brokerage account into either an existing or else a newly established account under the transferee’s identity and taxpayer identification number. The endorsement (assignment), with its signature medallion guarantee, and the relevant authorization documents – i.e., certificate of trust or court issued probate letters as relevant — and death certificate (if the existing account holder is deceased) must still be provided to the brokerage.
Using a broker and a brokerage account is the common approach to transferring securities. Doing so avoids using multiple transfer agents and facilitates recordkeeping and buy/sells through a single broker. The foregoing discussion is not legal or financial advice. Anyone confronting these issues should consult an attorney or financial advisor.
Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.