What is the process for liquidating inherited individual stocks?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
harmony
Posts: 379
Joined: Sun Nov 24, 2013 1:35 am

What is the process for liquidating inherited individual stocks?

Post by harmony » Thu Oct 12, 2017 12:23 am

A Wells Fargo advisor at a brokerage firm holding an account owned by a recently-deceased relative called the executor of the estate and offered to “research” the deceased’s individual stocks (held for many decades) at no charge. He said if the probate lawyer were to do it, it would cost the estate the lawyer’s hourly rate. The WF guy said in exchange for doing this for free, he would open accounts at WF for each of the beneficiaries. This seems strange. Why wouldn’t the executor be able to direct the WF guy to liquidate the stocks and write a check to the deceased’s estate account? Everything gets stepped-up basis, so why the need for research? Shouldn’t WF have all the records and provide them to the executor or lawyer, without the need for extra research? Shouldn’t this all be clear from the most recent quarterly account statement? I wonder if the WF guy is maneuvering to keep the funds invested at WF throughout the probate process to prevent them from being liquidated and being used for significant estate expenses, i.e. taxes and lawyer and court fees. Should we be suspicious that he could be looking for easy access to new clientele, beneficiaries unfamiliar with individual stocks, whom he can perhaps persuade to invest in some other WF products or fee programs? Thanks in advance.

mega317
Posts: 886
Joined: Tue Apr 19, 2016 10:55 am

Re: What is the process for liquidating inherited individual stocks?

Post by mega317 » Thu Oct 12, 2017 12:38 am

harmony wrote:
Thu Oct 12, 2017 12:23 am
Should we be suspicious that he could be looking for easy access to new clientele, beneficiaries unfamiliar with individual stocks, whom he can perhaps persuade to invest in some other WF products or fee programs? Thanks in advance.
Bingo. Why else would he do this for free? He may not be trying to trick anyone, but he's at least trying to do you a "favor" so that you might reward him with your business.

fourwheelcycle
Posts: 199
Joined: Sun May 25, 2014 5:55 pm

Re: What is the process for liquidating inherited individual stocks?

Post by fourwheelcycle » Thu Oct 12, 2017 6:51 am

I am the POA and will executor for my 95 year old father. When he asked me to take over his finances a few years ago I worked with him to move all of his individual stocks at Computershare to a new brokerage account I helped him open at Vanguard, with me having full agent authorization.

His will leaves all his assets to his children in equal shares. In order to avoid probate I set up each sibling as a TOD recipient, in equal shares, for his brokerage account holdings. Vanguard has assured me that when mey father dies all I will have to do is provide them a death certificate and have each sibling set up an account at Vanguard. Vanguard will then offer, separately to each sibling, to have their shares of my father's stocks deposited to their Vanguard account or to have Vanguard sell the stocks and deposit the proceeds to their account settlement fund. Each sibling may then transfer their stock shares to their own investment house or, more likely, transfer their no capital gain stock proceeds to their local bank. They can then continue or close their new Vanguard account, all with no fees since their accounts will be related to my Flagship account.

dbr
Posts: 23255
Joined: Sun Mar 04, 2007 9:50 am

Re: What is the process for liquidating inherited individual stocks?

Post by dbr » Thu Oct 12, 2017 7:59 am

harmony wrote:
Thu Oct 12, 2017 12:23 am
A Wells Fargo advisor at a brokerage firm holding an account owned by a recently-deceased relative called the executor of the estate and offered to “research” the deceased’s individual stocks (held for many decades) at no charge. He said if the probate lawyer were to do it, it would cost the estate the lawyer’s hourly rate. The WF guy said in exchange for doing this for free, he would open accounts at WF for each of the beneficiaries. This seems strange. Why wouldn’t the executor be able to direct the WF guy to liquidate the stocks and write a check to the deceased’s estate account? Everything gets stepped-up basis, so why the need for research? Shouldn’t WF have all the records and provide them to the executor or lawyer, without the need for extra research? Shouldn’t this all be clear from the most recent quarterly account statement? I wonder if the WF guy is maneuvering to keep the funds invested at WF throughout the probate process to prevent them from being liquidated and being used for significant estate expenses, i.e. taxes and lawyer and court fees. Should we be suspicious that he could be looking for easy access to new clientele, beneficiaries unfamiliar with individual stocks, whom he can perhaps persuade to invest in some other WF products or fee programs? Thanks in advance.
Of course he is trying to get you all signed up as clients. What else does an advisor at WF do? In my opinion this ranks somewhere along the line of business as usual down to sleazy unless maybe you think those two things are the same.

ProfLA
Posts: 16
Joined: Sun Jun 25, 2017 5:45 pm

Re: What is the process for liquidating inherited individual stocks?

Post by ProfLA » Thu Oct 12, 2017 8:53 am

If one of the accounts was an IRA that potentially at least partially comprised after tax contributions then perhaps this is one issue that may need to be "researched", as i understand the beneficiaries would not be taxed on withdrawals of after tax contributions, on a pro rata basis. However, this is research that may need to be done with the deceased's accountant, rather than the account custodian.

dbr
Posts: 23255
Joined: Sun Mar 04, 2007 9:50 am

Re: What is the process for liquidating inherited individual stocks?

Post by dbr » Thu Oct 12, 2017 8:59 am

ProfLA wrote:
Thu Oct 12, 2017 8:53 am
If one of the accounts was an IRA that potentially at least partially comprised after tax contributions then perhaps this is one issue that may need to be "researched", as i understand the beneficiaries would not be taxed on withdrawals of after tax contributions, on a pro rata basis. However, this is research that may need to be done with the deceased's accountant, rather than the account custodian.
I agree that the executor and the beneficiaries would be better off seeking tax advice from a tax accountant and not from an investment salesman.

Chip
Posts: 1487
Joined: Wed Feb 21, 2007 4:57 am

Re: What is the process for liquidating inherited individual stocks?

Post by Chip » Thu Oct 12, 2017 9:16 am

fourwheelcycle wrote:
Thu Oct 12, 2017 6:51 am
Vanguard has assured me that when mey father dies all I will have to do is provide them a death certificate and have each sibling set up an account at Vanguard. Vanguard will then offer, separately to each sibling, to have their shares of my father's stocks deposited to their Vanguard account or to have Vanguard sell the stocks and deposit the proceeds to their account settlement fund.
While they will do this, it is likely that it won't be as clean a process as you expect. The reason is that as each beneficiary sends in their Change of Ownership Form (form FTFRDD) and new account registration form (form AREG), Vanguard will split off the appropriate portion of the account at the time it processes the form and deposit it in the new account. Any dividends that hit the account after the first beneficiary receives their distribution will only be distributed to the remaining beneficiaries when they file their paperwork. The first beneficiary to file won't get a distribution, even if entitled.

Quick example:

John dies on 6/15, leaving his account equally to Jill and Jane via POD designations. Jill submits her paperwork promptly, it's processed on 7/15 and Jill gets 50% of each and every asset in the account as of 7/15.

Jane doesn't get her paperwork processed until 8/1. Between 7/16 and 8/1 several individual stocks paid dividends into John's account. These stocks had gone ex-dividend before 7/15 (meaning Jill is entitled to half of the dividend). The broker won't send any money to Jane -- it will distribute it all to Jill.

Further, let's say John owned a bond mutual fund in his account, one that accrues interest every day and pays it out at the end of the month. Jill won't receive her half of the interest that accrued from 7/1 to 7/15 -- it will be paid into John's account on 7/31 and will ultimately go to Jane.

If Jill and Jane are on good terms, numerate, understand ex-dividend dates vs. pay dates, etc., bond fund accrual and agree that John's intent was that they share in the account equally, then it isn't a problem. They do the calculations and Jane writes a check to Jill to "true up" the accounts. If they're not on good terms it's a whole different situation.

I have experience with this situation with bond funds at Vanguard and individual stocks at Fidelity. I kept a spreadsheet to track it all. I complained to Fidelity about the issue. They're response was essentially "You're right, we don't handle that very well. Sorry." I didn't bother contacting Vanguard.

btenny
Posts: 4107
Joined: Sun Oct 07, 2007 6:47 pm

Re: What is the process for liquidating inherited individual stocks?

Post by btenny » Thu Oct 12, 2017 10:10 am

Wells trade is a very good low cost brokerage. You can tell the sales guy to set up an account for each beneficiary in Wellstrade. Then have him distribute the benefit split to both parties on the same day 50/50. Then after the split the beneficiaries can sell stocks and funds as needed on Wellstrade at low cost. He will not like doing this but has to as it is just another part of his company.

Do not tell him to sell anything in the old account. He will charge big fees.

Wellstrade is easy to work with (total phone and internet broker) and as cheap as Vanguard and you can buy most Vanguard funds and etfs.

Good luck..

User avatar
Artsdoctor
Posts: 2865
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: What is the process for liquidating inherited individual stocks?

Post by Artsdoctor » Thu Oct 12, 2017 10:14 am

harmony wrote:
Thu Oct 12, 2017 12:23 am
A Wells Fargo advisor at a brokerage firm holding an account owned by a recently-deceased relative called the executor of the estate and offered to “research” the deceased’s individual stocks (held for many decades) at no charge. He said if the probate lawyer were to do it, it would cost the estate the lawyer’s hourly rate. The WF guy said in exchange for doing this for free, he would open accounts at WF for each of the beneficiaries. This seems strange. Why wouldn’t the executor be able to direct the WF guy to liquidate the stocks and write a check to the deceased’s estate account? Everything gets stepped-up basis, so why the need for research? Shouldn’t WF have all the records and provide them to the executor or lawyer, without the need for extra research? Shouldn’t this all be clear from the most recent quarterly account statement? I wonder if the WF guy is maneuvering to keep the funds invested at WF throughout the probate process to prevent them from being liquidated and being used for significant estate expenses, i.e. taxes and lawyer and court fees. Should we be suspicious that he could be looking for easy access to new clientele, beneficiaries unfamiliar with individual stocks, whom he can perhaps persuade to invest in some other WF products or fee programs? Thanks in advance.
Your intuition is right on target. I don't know for sure if I'm missing something or not because it seems so straightforward. When the owner dies, the cost basis of his holdings are all reset on the date of death. If he recently died, this information would be at one's fingertips and I'm not sure what sort of reserach is necessary. The post above brings up some very good points; the executor would want to know what sort of fees are involved with all transactions. I would recommend trying to find out that information online first and then discussing it with the representative so that there is no conflicting information. Unfortunately, I'd go into with eyes wide open and with some degree of skepticism.

btenny
Posts: 4107
Joined: Sun Oct 07, 2007 6:47 pm

Re: What is the process for liquidating inherited individual stocks?

Post by btenny » Thu Oct 12, 2017 10:56 am

I suspect your relative was a customer at AG Edwards or Wachovia back when. Then in the 2008 meltdown those people and businesses got bought by Wells Fargo and turned into Wells Fargo full service brokers. They are full service and walk in and have 1% plus sales charges and various investment plans. My FIL was a customer there. They charged him a ton and sold him 30 or more individual stocks and some high cost mutual funds. His accounts were a mess. We were able to close them out by moving the stuff to Wellstrade as describbed above. Then we sold almost all of it and went to cash and some Vanguard funds.

We just had 2 or so meetings with the broker and then they did some paperwork and 3 weeks later all the stuff was moved and divided to each beneficieries account.

harmony
Posts: 379
Joined: Sun Nov 24, 2013 1:35 am

Re: What is the process for liquidating inherited individual stocks?

Post by harmony » Thu Oct 12, 2017 11:37 am

Thanks for helpful responses so far. The executor doesn’t want the beneficiaries to feel intimidated by the high-pressured sales talk from WF. Not all the beneficiaries want new accounts. The executor told me this morning there are no named beneficiaries on the stocks. My relative had it all go to his estate where he had clearly named beneficiaries. There will be large expenses to pay first.

There were no mutual funds or IRAs involved, only individual stocks. Some were purchased nearly 50 years ago. Will we need the original paper stock certificates? The WF fee to close an account with an IRA is posted at $95. We're not sure what they would charge to liquidate individual stocks and close the account. The executor doesn't want to hang onto individual stocks during probate in an uncertain investment climate. He wants the funds to be kept in several estate account/s (subject to FICA limits) where they can be more readily accessed to pay expenses and eventual distributions. In his last few years our relative became disorganized. The executor found uncashed checks under piles of unrelated stuff in his home. Tens of unclaimed dividends and “no activity” accounts were transferred to our relative's state “treasure hunt” in his later years. He knew this and tried to get them out, but gave up on it. He said the heirs would get stepped-up basis. His annual income was SS and rent. His taxes on dividends would have been zilch.

We are aware of the WF fraud schemes. We have no idea yet whether our relative had any phantom accounts fraudulently created in his name to get more commissions for WF sales agents. It doesn’t seem like we could trust WF to research this. Has anyone with WF encountered any problems with their brokerage account holdings, or was this scandal just related to other kinds of WF accounts?

fourwheelcycle
Posts: 199
Joined: Sun May 25, 2014 5:55 pm

Re: What is the process for liquidating inherited individual stocks?

Post by fourwheelcycle » Thu Oct 12, 2017 11:48 am

Chip wrote:
Thu Oct 12, 2017 9:16 am
While they will do this, it is likely that it won't be as clean a process as you expect.
Chip,

Thanks! Your response is one of the reasons I make posts on this forum. When I describe my expectations I often learn there are gaps in my understanding. I am going to save your post so I can look out for these issues. When the time comes I'll talk to my Vanguard rep and see if it might expedite matters to have my siblings set up their accounts on their own, but send their other forms to me so I can submit all of them at the same time in the hope they will be processed together.

In any event, all of us siblings get along fine, so I am sure we can compare notes own how much we each received after the dust settles. I am keeping some of my father's funds in a joint online savings account in order to feed money to his local checking account and pay his final expenses. If necessary, I can adjust the final cash distributions to my siblings to even up the outcomes.

User avatar
bengal22
Posts: 1260
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: What is the process for liquidating inherited individual stocks?

Post by bengal22 » Thu Oct 12, 2017 12:10 pm

I had a similar situation and I do not understand what there is to research. Each of the beneficiaries has inherited a certain number of a number of stocks. Each of the beneficiaries can do with the stocks what they want to do with the stocks. It is very easy(with a medallion letter) to distribute the shares to each of the beneficiaries. Then they can decide what they do. When I was an executor for my FIL, we distributed the stocks rather than cash them out within the estate. I did not want to get into a situation where the estate might have to file an estate income tax.

btenny
Posts: 4107
Joined: Sun Oct 07, 2007 6:47 pm

Re: What is the process for liquidating inherited individual stocks?

Post by btenny » Thu Oct 12, 2017 12:18 pm

You actually need a TIN (tax ID number) right now. This is set up via the IRS and your accountant to cover gains and losses and so forth for the estate. The tax person will charge $1-2k for estate tax work. Save that much in the checking long term. Meet with the accountant and executor to verify this process.

When we did this the Wells people had to move all the stocks and cash etc. to the new account with the TIN number first. Then that account could buy and sell and make disbursements to us. That full service account charged us $200 per stock to sell. So we transfered to the tin account and then to the wellstrade account. Then we spent zero to sell most stocks. Then we disbursed cash and shares of stock that were not sold. We sold several small stocks that were pink sheet traded as we could not value them well. Plus there were uneven share counts to split . So cash was simpler.

We had to file two years taxes due to the time needed to sell the house. So we had to do two years of estate taxes. Oh and some stock dividends were received during this long process so yes the tax filling were necessary.

SGM
Posts: 2365
Joined: Wed Mar 23, 2011 4:46 am

Re: What is the process for liquidating inherited individual stocks?

Post by SGM » Thu Oct 12, 2017 12:50 pm

We are liquidating the estate of a recently deceased relative. Nothing can be done until we get the death certificates. The POA needs the proper form to be declared the executor or whatever term they use. By the way death certificates cost $20 each additional copy in this state. Official copies are the only thing that can be used. We are not too far along in the process. However the plan is to sell all stock as soon as possible. This was advised as the executor could be sued if the stocks go down in value in a stock market crash.

I did talk to a Vanguard representative who stated that it would be best to leave everything with the current custodian of the account until the funds were allocated to the different individuals named in the will. Then each individual could easily transfer his account to whatever custodian desired. Transferring the account of a deceased person is more complicated and the Vanguard representative advised against doing so.

The whole process could take considerable time ands the current financial advisor will continue to collect his fee even though the account will only contain individual muni bonds and cash soon enough. I don't know if it is possible to get the financial advisor out of the picture once the title of the account is changed to an estate account. We have not had to deal with this type of situation before.

Boglegrappler
Posts: 915
Joined: Wed Aug 01, 2012 9:24 am

Re: What is the process for liquidating inherited individual stocks?

Post by Boglegrappler » Thu Oct 12, 2017 1:17 pm

We are aware of the WF fraud schemes. We have no idea yet whether our relative had any phantom accounts fraudulently created in his name to get more commissions for WF sales agents. It doesn’t seem like we could trust WF to research this. Has anyone with WF encountered any problems with their brokerage account holdings, or was this scandal just related to other kinds of WF accounts?
At the risk of side-tracking the thread, the Wells Fargo justification for outrage/annoyance is much stronger for its shareholders than for its customers. The "scandal" created quite little economic harm to customers. See this link for a good discussion of it from last year. Matt Levine is a good writer about many financial things, although he's beyond the range of many Bogleheads.

https://www.bloomberg.com/view/articles ... e-accounts

In any case, I doubt you have much to be concerned about from the unauthorized account episodes.

NotWhoYouThink
Posts: 1238
Joined: Fri Dec 26, 2014 4:19 pm

Re: What is the process for liquidating inherited individual stocks?

Post by NotWhoYouThink » Thu Oct 12, 2017 1:26 pm

The WF account scandal was in the banking side, not the Advisors side. Still, I'd avoid dealing with the advisors, they have their own issue.
I had a similar situation and I do not understand what there is to research. Each of the beneficiaries has inherited a certain number of a number of stocks.
Not quite, in this case. OP says everything goes to his estate, which will have some costs and fees, and the stock may be used to cover those. In that case it makes sense to liquidate. Individuals can take risks with stocks, but there doesn't seem to be much reason for an executor to do so. Someone above mentioned getting the funds moved to a Well Trade account. That sounds like a good idea, and I expect the advisor to be no help whatever with that because it cuts out his fees. The executor will have to figure it out.

User avatar
Earl Lemongrab
Posts: 2637
Joined: Tue Jun 10, 2014 1:14 am

Re: What is the process for liquidating inherited individual stocks?

Post by Earl Lemongrab » Thu Oct 12, 2017 1:35 pm

I served as executor my mother's estate. I handled all of the investment accounts myself. You don't need them divided. I sent in the forms with the death certificate and Letters Testamentary. The custodian sold the investments and sent me a check made out to the estate. There's no reason to distribute stocks to beneficiaries. They probably don't want them, and if they do they can buy them on their own with the cash.

The only "research" needed for taxable accounts is figuring the tax due. In my case, the custodians included a statement showing the account value on date of death to help figure the growth.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

Post Reply