Most shares of stock are held in electronic form these days, but there are still quite a few paper stock certificates around. After a death in the family, ownership of the shares must be transferred to a beneficiary before they can be cashed in. Stock certificates are registered with the transfer agent that handles securities transactions for the company that issued the stock. If you are the person who inherited the stock, how you handle transferring ownership and selling the shares depends on whether the shares have to go through probate.
Contact the Transfer Agent
Each company that issues stock has a transfer agent. You can find the transfer agent on the company’s investor relations website or by calling the department of shareholders’ services. Ask if the stock was held in one person’s name with a stated transfer-on-death beneficiary or if the shares were held jointly with right of survivorship. In either case you, as heir, can transfer ownership yourself. If the stock was registered in another manner, it must go through probate and the executor of the estate will handle the transfer of ownership. When stock must go through probate, give the stock certificates to the executor. She’ll need them to change the ownership registration.
Gather Required Documents
You’ll need a transfer of ownership form from the transfer agent, a certified copy of the death certificate and personal identification. If you cannot transfer ownership yourself, an executor also needs a certificate of authorization from the probate court and a copy of the will or a court document identifying the person entitled to receive the shares.
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Bring Documents to Qualifying Institution
Take the stock certificates and the documents to a financial institution, such as a bank or brokerage firm, that participates in the Medallion Stamp Program. An authorized bank official must witness your signature on the transfer of ownership form and on the stock certificates. He will provide a Medallion Signature Guarantee verifying your signature. Do not have these documents notarized. Transfer agents generally will not accept a notary stamp as a substitute for the Medallion Signature Guarantee.
Send Documents to Transfer Agent
Ship the stock certificates, Medallion Signature Guarantee and other documents to the address supplied by the transfer agent. To be safe, use certified mail and insure the package. Ask for a return receipt verifying the transfer agent received the package.
After reviewing your package, the transfer agent will notify you that the transfer has been processed. Then, all you need to do is call the transfer agent and place a sell order for the shares. You will be credited with the sale proceeds.
Understand Tax Ramifications
You will not owe income taxes on the value of the stock as of the date of death. However, if the stock price goes up before you cash in the shares, you will have a taxable gain equal to the difference between the value of the stock on the date of death and the date of sale. You have to report this gain on your tax return.
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