What Is the Procedure to Transfer Stock From a Deceased Owner to a Beneficiary?

By Tom Streissguth

The transfer of stock shares after a shareholder's death requires a series of steps by the legal representative of the deceased. An executor, trustee or personal representative may have authorization to complete the transfer, according to the terms of a will. Banks and brokerages have standard operating procedures that follow the legal requirements for a transfer of shares.

Executors and Personal Representatives

A will controls the distribution of assets after the death of an individual. If the individual does not have a valid will, he's "intestate" and state law governs inheritance by the survivors. An executor named by the will manages the transfer of stock shares; when probate court handles intestate individuals, the court names a personal representative to carry out this responsibility. Only persons with legal authority to handle the assets of the estate may transfer stock shares and other property.

Named Beneficiaries

Wills, trusts and insurance policies name beneficiaries who are to receive assets upon the death of the original owner. A beneficiary may also be named on a bank or investment account. This means the assets in the account go directly to the beneficiary or, in some cases, a joint account-holder. No transfer by a third party is required; the "payable on death" or "transfer on death" account automatically overrides any provisions in a will.

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Transfer Procedure

When a will goes through probate, the court issues a letter authorizing the executor to handle the estate's assets. The executor uses this authorization to notify the brokerage or transfer agent that holds the stock certificates. The brokerage then sends the certificates and a transfer of ownership form to the executor, who brings the forms to the bank. By rules enforced by the Securities and Exchange Commission, stock transfers require a Medallion Signature Guarantee for the executor's signature on the certificates. After the medallion guarantee is issued, the executor then returns the documents, along with a copy of the will, back to the transfer agent, who re-issues the certificates in the name of the beneficiary.

Street Name Stocks

If the shares are held in "street name" or "book entry" form by a broker, there are no physical certificates to transfer or re-issue. Instead, an executor must complete a stock power form, which authorizes him to handle the transfer through the broker. The stock power requires the name, address and Social Security number of the new owner, as well as a medallion-guaranteed signature of the executor. IRS rules also require that the new shareholder complete a W-9 form, which lists his taxpayer identification number for the broker's tax-reporting purposes.

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