How are stocks, accounts, and brokerage accounts transferred after the death of the owner? You may have spoken with the account holder and they say they need “Letters Testamentary.” How do you write those Letters?
Don’t let that term fool you! Letters Testamentary are the formal court document showing the appointment of an Executor or other Personal Representative of an Estate and are the end result of a probate proceeding in the County Court. You can’t write them or buy them anywhere. Stocks normally have a “Transfer Agent”—frequently in New York City. It is very unusual for a transfer of stock to occur without Letters Testamentary. Some sort of formal probate process in the County Court is almost certainly required. Remember that assets with designated beneficiaries, like life insurance policies, are generally not subject to the terms of your Will. (See our prior post on this here).
Bank accounts, investment accounts and life insurance proceeds can be controlled by naming a beneficiary or beneficiaries prior to death. Then, the institution pays the funds directly to the named beneficiary without any need for a Will, Letters Testamentary and the probate process. In fact, with tax deferred accounts (IRAs, etc.), there may be substantial income tax savings from “rolling over” the account into the name of the beneficiary. It should be a simple matter to do so, but it frequently isn’t! One advantage to having beneficiaries of a tax deferred account is that each beneficiary can take their funds in different ways. So one could “roll” the account into their own name and only take small distributions (and pay tax on that distribution) annually, continuing to defer the rest. But another beneficiary can choose to “cash out” their interest when they inherit it (and be liable for all the deferred income tax at that time).
If you have questions about estate planning and how you can structure your accounts to work with your Will, please give us a call at (254) 300-7909 and set up an appointment. We would be happy to help you.