Inheritors Need to Open an EJ Account to Access Inheritance?

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uclalien
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Inheritors Need to Open an EJ Account to Access Inheritance?

Post by uclalien »

My grandma (95) passed away in early March. She was an amazing woman who raised 3 kids on her own when my grandpa passed away far too young.

At her memorial service, my grandma's Edward Jones advisor had the nerve to approached my aunt and, not so subtly, suggest they meet about moving her investments to EJ. Needless to say, I was angry when my aunt mentioned this to me and told them to run away from EJ as quickly as possible.

Now, this advisor is telling my dad and his siblings that they each need to open an EJ account to access the inherited investments. This doesn't sound right. I advised them to speak with an estate attorney before making any decisions or taking any action.

My question is, do you see any reason why they may need to open EJ accounts to gain access to their inheritance? I assume they can transfer the holdings in-kind to each of their preferred accounts, but don't know if there is an intermediate step that must be taken to get their share of the inheritaces in each of their names. I suspect that it's nothing more than the advisor trying to maintain control of my grandma's former investments, but want to draw on the collective wisdom of this community before telling my dad anything else.

Thanks for your help.
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FiveK
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by FiveK »

Sorry for your loss. It was the same procedure at Schwab for a Transfer on Death account.

According to this Transfer on Death (TOD) writeup, "In most cases, a new account is set up for the beneficiary, and the deceased person's securities are transferred into it. Typically, no buying, selling, transferring of the account to another firm, or other activities may occur until the account is open and legal authority has been established." Don't know if that is how your grandma's account was structured.

Opening the account, receiving the inheritance, then transferring ASAP to your aunt's brokerage of choice may be the best approach.
alphabet55
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by alphabet55 »

Estate planning attorney here. I've never heard of anyone requiring new accounts to be opened in-house for heirs, as an intermediate step or otherwise, and this should not be required. I have limited experience with TOD accounts, however, if that's what you're grandmother had.
OnTrack
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by OnTrack »

Even if separate EJ accounts need to be opened for each heir, there is no obligation to leave assets there. Each heir can then immediately request that their assets be transferred to another institution. You might want to be sure that the tax basis for each asset is valued as of the date of death before they are transferred to another institution; that is the way it normally works.
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celia
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by celia »

The first thing the (assumed) beneficiaries should do is to find out if the deceased had a will and/or trust. If so, the executor/trustee takes charge depending on what the documents say.

If the deceased died last year and held any IRA in their own name or as an Inherited IRA, any untaken RMDs usually have to be taken before the account(s) are split. If death occurred this year, the RMD is waived for 2020, but the beneficiaries have 10 years to empty out the IRAs but can do it all in the 10th year.

If the estate first has bills to pay and there can be unknown debts (taxes, medical, mortgages, etc) those may need to be taken care of before anything is split. It all depends on what estate planning was done, if any.

How would you expect another custodian to pull assets from the deceased’s accounts and give them stepped up values unless the deceased’s accounts are first split at EJ?

One thing to be wary of (no matter where the deceased had invested) is if there are any fees for opening or closing new accounts for the beneficiaries. The beneficiaries should read EVERYTHING before signing anything. They should be clear that they don’t want any investment advice or trading in their accounts and that the accounts are planned to be moved elsewhere.

We had an investment advisor show up at a family funeral, but he was a long time “friend” of the deceased and most of the beneficiaries (adult children) were from out-of-town, so it was mostly for convenience to talk to all of them at the same time later that day. The beneficiaries could hear each others’ questions and some of them didn’t know as much about investing as others did.
NotWhoYouThink
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by NotWhoYouThink »

My question is, do you see any reason why they may need to open EJ accounts to gain access to their inheritance? I assume they can transfer the holdings in-kind to each of their preferred accounts, but don't know if there is an intermediate step that must be taken to get their share of the inheritaces in each of their names.
It depends. Some funds can be transferred in kind, some must be liquidated at EJ and the cash transferred. But that is the second step.


FIRST -

What kind of accounts?
-If an IRA that lists beneficiaries, then accounts need to be set up, probably at EJ, for each beneficiary, then each beneficiary can decide what to do from there.
-If an IRA that does not list beneficiaries, then look at what the will says. If no will, look at what state law says happens if there is no will.
- If not an IRA, but beneficiaries are listed, there are a couple of options. Probably the fastest is to set up accounts at EJ for each beneficiary, split the funds in kind to each account, and each beneficiary can decide what to do. But it would also be fine to liquidate everthing and send each beneficiary a check. If all beneficiaries agree on this option and meet as a group with the EJ rep this would be fine.
- If not an IRA and there are no beneficiaries, then the executor will have to make decisions.
aristotelian
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by aristotelian »

If these are TOD accounts, the first step is to transfer the account to the beneficiary. You can't move it to another custodian until it is in your name. You should suggest to the beneficiaries that they move immediately and show them the Kronstantinople blog.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by livesoft »

OnTrack wrote: Wed Apr 01, 2020 1:38 am Even if separate EJ accounts need to be opened for each heir, there is no obligation to leave assets there.
That is true, but EJ will apply an account closing fee for each new account opened. Death by a thousand cuts.
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Carl53
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by Carl53 »

MIL had IRA CD at a locaL credit union. Inherited by three siblings late last year. They did not have to open new account with credit union to acquire assets. In fact all three chose to have funds transferred to new inherited IRA accounts at Vanguard. The empty IRA accounts were opened first and then the CU transferred each one's share to their individual inherited IRA. One did not previously have any Vanguard accounts. It took perhaps better than two weeks but all was complete by EOY after starting around December 10.
alex_686
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by alex_686 »

Sorry for your loss. Probably not in the best taste to bring this up at the furneral. This is quite common.

This is normal and I would encourage it. Not everybody was to cash out or take the tax implications that year. They may not want the rest of the family to know what they are doing. etc. It is just much cleaner this way. Normally a new accounts are opened, assets transferred. The rep takes one last hail marry pass to keep the accounts. Then the accounts are liquidated or transferred. Fees tend to be minimal.
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8foot7
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by 8foot7 »

I've been through this three times now and each time assets were split off where they were housed and new accounts for beneficiaries created at the brokerage house where the decedent held the assets. If this is not normal, then it's at least not rare. And you can avoid the account closure fee in a few ways -- leave one share of something behind, or if you're cashing out, withdraw all but a penny, etc. Or you can not worry about $95 when you're getting a windfall (not excusing the fee but in the grand scheme of things...)
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by afan »

I dealt with this once. The assets were held in a trust account. We had to open a new account for the then irrevocable trust. We did it at the same broker since we were happy with it. I don't know whether we would have been required to open the new account at the broker rather than transfer to a new account elsewhere. It was not an EJ-style high priced company, so there were no fees to do any of this.
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senex
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by senex »

8foot7 wrote: Wed Apr 01, 2020 7:42 am I've been through this three times now and each time assets were split off where they were housed and new accounts for beneficiaries created at the brokerage house where the decedent held the assets. If this is not normal, then it's at least not rare.
Agree. I've seen this process at several major brokerages (Vanguard, Schwab, etc).

Whether it is legally required, or just company policy, or maybe just makes the computer systems easier, I don't know. But in my experience that's how all the joint/TOD accounts were handled.

Once it's in your name you are free to move the funds anywhere you wish.
KSActuary
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by KSActuary »

Custodians do not like to transfer assets to another custodian for an account with a different titling. Open account at EJ then move next day.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by bsteiner »

If it's not an IRA, wouldn't the executors open an estate account and then move it to an estate account at the new financial institution?
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BolderBoy
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by BolderBoy »

uclalien wrote: Tue Mar 31, 2020 11:33 pmMy question is, do you see any reason why they may need to open EJ accounts to gain access to their inheritance?
This was the procedure for my sister when she inherited my mom's Vanguard TOD account. VG opened a new account in my sister's name. She then transferred the money and closed the account immediately.

Was also the procedure required for my mom's TOD account held at BB&T Securities. My sister and I transferred the funds and closed the accounts (less the account closing fees, naturally) immediately.

So apparently not uncommon at all.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by RetiredAL »

And I'll bet the EJ will assess their closing fee on each of the newly formed Beneficiary Accounts.
donall
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by donall »

Depends on the account. If a revocable trust then a new irrevocable trust account is opened. Transfers to beneficiaries can be done to any brokerage by trustee. If a TOD account then, often individual beneficiary accounts at holding brokerage are done.
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uclalien
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by uclalien »

Thank you for your replies. I sincerely appreciate all of your feedback.

I honestly do not know what kind of account my grandma had or how her will/trust were set up. I am trying to not butt my nose into the process, only provide a minimal amount of guidance when there are questions.

I believe all of her holdings were in individual stocks (no IRAs) that she inherited from her own mother decades ago. From the sound of it, she would not let the EJ financial advisor move her investments into his preferred investments, which likely saved her a ton in expenses and fees over the years. However, I do know that her investment portfolio was very risky as a result, which may have resulted in a sizeable drop in value recently.

Given my lack of behind the scenes knowledge of the will/trust situation, I have been strongly advising my dad and his siblings to talk to an estate attorney before taking any action. I don't want them to forgo a few thousand dollars worth of advice and it ultimately costs them tens of thousands.

From the sound of it, it doesn't appear uncommon for inheritors to be required to open up accounts before transferring each of their share of the funds elsewhere. I definitely don't want them to cash anything out until they have gotten the proper advice.

Thanks again!
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FiveK
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by FiveK »

uclalien wrote: Wed Apr 01, 2020 8:55 pm However, I do know that her investment portfolio was very risky as a result, which may have resulted in a sizeable drop in value recently.
In which case her heirs might consider Tax loss harvesting on the way to the asset allocation of their choice.
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uclalien
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by uclalien »

FiveK wrote: Wed Apr 01, 2020 8:57 pm
uclalien wrote: Wed Apr 01, 2020 8:55 pm However, I do know that her investment portfolio was very risky as a result, which may have resulted in a sizeable drop in value recently.
In which case her heirs might consider Tax loss harvesting on the way to the asset allocation of their choice.
That's what I was thinking given the timing of her passing.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by scifilover »

In 2007 I was handling In-laws CA Trust. MIL passed in 2004, and FIL in 2007. There were considerable unrealized gains on the very substantial assets in the trusts. I could have sold all the assets and distributed cash, however the trust would have had to pay tax on the gains first. By asking the beneficiaries to open accounts at Schwab, I was able to do in-kind distribution of the assets. Beneficiaries would then receive the assets with a step up in basis to price on the date of death for each Trustor. Thereafter, they could do as they wished with the assets, transfer, sell etc. Schwab was very helpful in dealing with the lists of assets with the distributions to each of the beneficiaries. It took a little time, but in the end everyone was happy.

In thinking about your situation today, even though the market has gone down quite a bit, it is very possible that there still are substantial unrealized gains.........
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uclalien
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by uclalien »

scifilover wrote: Thu Apr 02, 2020 8:47 am In thinking about your situation today, even though the market has gone down quite a bit, it is very possible that there still are substantial unrealized gains.........
Understood. The only two real pieces of advice that I have provided to them is: (1) talk to someone who knows more than me (an estate attorney), and (2) do not sell/liquidate any investments until those investments have been transferred in-kind to their individual accounts (whether at EJ or elsewhere) and the tax/other implications have been considered.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by psteinx »

People on this forum complain about EJ a lot. That said, it's probably not THAT hard (or costly) to set up an account, transfer securities in, then transfer them out or even let EJ sell them. Yes, EJ often charges AUM fees, and/or likely higher commissions on trades than free options at many brokers. But my guess is that if the securities are just transferred from account A to account B (within EJ), then out to account C (outside of EJ), then the fees would be modest.

The "risk", I suppose, is that some folks will find the EJ account sticky, establishing relationships, and fee/cost structures, with EJ that they otherwise wouldn't have, to their detriment. Maybe. But those savvy enough to already have a Fidelity or Vanguard or Schwab account are probably less likely to do this, and for those with no real experience with brokers, having EJ to hold their hand for at least a time may not be so bad, even taking into account EJ's non-trivial fees.
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by senex »

uclalien wrote: Wed Apr 01, 2020 8:55 pm Given my lack of behind the scenes knowledge of the will/trust situation, I have been strongly advising my dad and his siblings to talk to an estate attorney before taking any action. I don't want them to forgo a few thousand dollars worth of advice and it ultimately costs them tens of thousands.
I don't discourage talking to an attorney, but the first steps can be done without one (and may make subsequent attorney interactions smoother and cheaper).

If EJ stands ready to disperse assets to the inheritors, I would guess the deceased had a regular individual account with named persons as TOD/beneficiary. You can confirm with EJ, and if that's the case, the contents of any will or trusts is mostly irrelevant; the instructions she made to EJ supercede anything in the will, and the EJ assets pass directly, outside of will/probate.

It might get complicated if the account was titled to a trust, or the beneficiaries are not actual persons, or if she had a large complex estate plan that *intended* to pass this account through a trust or probate, and was accidentally setup wrong. In that case, there may be some optimizations you could do if you're willing to spend the money and months of delays incumbent in that process.

Absent complexities like that, if it were me, I would just setup the new EJ accounts, let EJ retitle the assets, verify the cost basis is correct, then do a full in-kind transfer out to Vanguard or Fidelity or whomever.
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celia
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Re: Inheritors Need to Open an EJ Account to Access Inheritance?

Post by celia »

senex wrote: Thu Apr 02, 2020 2:28 pm It might get complicated if the account was titled to a trust, or the beneficiaries are not actual persons, or if she had a large complex estate plan that *intended* to pass this account through a trust or probate, and was accidentally setup wrong. In that case, there may be some optimizations you could do if you're willing to spend the money and months of delays incumbent in that process.
If a trust is involved, I see it differently since things are simplified. Only the trustee would need to take any action. The beneficiaries (after getting a copy of the trust to read and understand) then usually wait while the trustee takes care of things.

When it is time to do the split, then they fill out the needed forms for new accounts (if needed). After all bills and taxes are paid, the trustee closes out the estate.

With a trust, only the trustee(s) needs to see an estate planning lawyer for guidance and to make sure they understand the trust. It is helpful if the trustee reads the trust before visiting the lawyer and writes down their questions beforehand. The trustee should also bring along a list of the deceased’ assets and liabilities and indicate which are already in the trust.
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