Getting rid of a defaulted bond in a trust

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revheck
Posts: 18
Joined: Sun Feb 12, 2012 8:29 am

Getting rid of a defaulted bond in a trust

Post by revheck » Wed Mar 25, 2020 8:45 am

My father recently passed away, leaving some investments in a brokerage account that was titled under a living trust. I am the successor trustee and, in preparation for distributing the estate to beneficiaries, we have liquidated all the assets at this brokerage except for one municipal bond. The brokerage tells me that they cannot sell the bond, because it is in default.

In order to close out the brokerage account (which has high fees) they say I need to move the defaulted bond to some other brokerage and hold it there also under the trust. The bond has a nominal value of only about $30, so moving it to another brokerage hardly makes sense to me, and in any case my goal is to shut down the trust.

Is there some simpler way to get rid of a defaulted bond? Can I just abandon it or donate it to charity? Thanks for any advice

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

Re: Getting rid of a defaulted bond in a trust

Post by Chip » Wed Mar 25, 2020 9:09 am

Ask the brokerage (nicely) if they will buy the bond for $.01.

Gill
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Location: Florida

Re: Getting rid of a defaulted bond in a trust

Post by Gill » Wed Mar 25, 2020 9:23 am

Why can't you distribute it to one of the beneficiaries? Would not be very considerate to give it to a charity. As suggested above, sometimes brokerage firms will buy such a holding for a nominal amount.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

donall
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Re: Getting rid of a defaulted bond in a trust

Post by donall » Wed Mar 25, 2020 9:25 am

Had the same issue with shares worth about $.30. Most brokerages will take over investments such as this for no cost for estates. They do this as a service.

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gasman
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Re: Getting rid of a defaulted bond in a trust

Post by gasman » Wed Mar 25, 2020 9:29 am

what about distributing all assets except the bond to the trustees and pretend the account no longer exists. I suspect that the brokerage will eventually close it maybe try to collect some type of fee, but by then the estate will have settled.

lawlopez
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Joined: Thu Jul 02, 2015 6:52 am

Re: Getting rid of a defaulted bond in a trust

Post by lawlopez » Wed Mar 25, 2020 9:35 am

You are entitled, I thought, to be remunerated expenses.
So, take the bonds at $.01 for payment for the time that you have invested in getting rid of the bonds.

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Phineas J. Whoopee
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Re: Getting rid of a defaulted bond in a trust

Post by Phineas J. Whoopee » Wed Mar 25, 2020 8:56 pm

Often brokers will agree to buy defaulted bonds, and bankrupted stocks, that is to say securities with zero remaining value, for a small fee that you pay, and then take care of the legalities themselves.

If the broker in question won't, it may be time to select a different broker for that and all the other investment business -- all the other investment business because, in the end, fair is fair.

PJW

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