When someone passes away, an executor or personal representative distributes the property the deceased left behind, including common stocks. When there is a will, the executor normally looks to the terms of the will. However, if the stock is not mentioned in the will, the executor looks to other provisions of the will and state laws to determine the rightful heirs to stocks.
The strict, legal definition of an heir is a person who inherits property under the laws of intestate succession. It does not apply to someone who inherits property through the terms of a will. "Beneficiary" is the name for someone who inherits through a will. However, many people, including lawyers and judges, often use "heir" to refer to anyone who inherits property whether by operation of law, will or other legal device. "Rightful heir" refers to the particular person who inherits a specific piece of property as opposed to all of a deceased's heirs in general.
Specified in Will
Ordinarily, if the common stock is mentioned in the will, the rightful heirs are the people the stock is explicitly bequeathed to in the will. A will allows a person to decide how she wants her property distributed when she dies. If the deceased specifies someone to inherit her stock, that wish is followed. However, there are exceptions under state law. Most states have statutes to protect spouses from being disinherited. The spouse usually has the option to receive a set portion of the deceased's estate instead of the property left to the spouse in the will. If the spouse chooses this option, it is possible that the rightful heir to the stock will be the spouse.
Most wills do not list every piece of property that a person owned at the time of death. The will might only state that certain types of financial instruments should be given to a person. That person is then the rightful heir. If the will is completely silent on the stock, the executor looks to the remainder clause that all good wills have. This clause states who should inherit any property not mentioned in the will. Whomever that clause mentions is then the rightful heir. If the will does not have a valid remainder clause, a court will determine the rightful heir by following the state's laws of intestate succession. This usually means that the rightful heirs are the closest living relatives of the deceased.
Both wills and stock transfers are the subjects of state laws. As every state has slightly different laws, you should look to your own state statutes to properly determine the rightful heirs to common stock. Inheritance of stock does not automatically transfer ownership of the stock. The executor or heir generally must use a transfer agent to register the change of ownership with the company that issued the stock.