What Happens to the Ownership of Stocks After a Person Dies?

What happens to stocks when you die? Who gets them? Or do shares have to be sold on death so that beneficiaries can receive cash? And if the shoe is on the other foot, how do you cash in stocks of deceased loved ones?

All these are uncomfortable questions to ask yourself or your loved ones. However, since nobody lives forever, they are relevant questions that need answers. You can rest assured that your shares don’t have to be sold upon your death.

​Read More​: The Difference Between Stakes, Shares and Stocks

The state of dying without a will is known as intestacy. It usually causes plenty of confusion for those who have been left behind. And your loved ones may end up not receiving the shares and other assets you meant for them to have in the ratio you would have preferred.

Typically, if you are married and your spouse is your only survivor, he or she may automatically inherit your shares. However, if you co-owned the shares with someone else in a joint account, the co-account owner may end up with your stock after presenting your death certificate. In the latter case, the shares will not go through the probate process.

If there is no transfer-on-death designation on your stock certificates, and you have not left a will, your shares will be transferred to your estate. And then, local succession laws will likely take precedence in how your entire estate is distributed to the people you have left behind, including your spouse, children, siblings and parents.

If none exist, the state will likely inherit what you left behind, even if you meant for your shares to go to a charity. So, take note of that.

Transfer-on-death (TOD) designation is available for many stock investors except those whose accounts are based in Texas or Louisiana. You can use it to designate the beneficiary who will take ownership of your stock after your death.

If you opt for a TOD designation for your brokerage account, your beneficiary can’t touch your shares when you are alive. But when you die, they can claim your shares without going through the probate process. And once they do, they can sell or hold the shares for as long as they want.

​Read More​: Transfer-on-Death States

If you create a will that designates beneficiaries of your shares, your brokerage account will become part of the probate process. When you die, probate courts will supervise the probate process for your estate. They will first ensure your estate has paid off all its debts. And then, the shares and other assets that remain will be distributed to your beneficiaries according to your will with the help of the executor you appointed.

If you are the beneficiary of a TOD designation, you need to contact the brokerage account and present the death certificate to access the shares the deceased left behind for you. You may also need to present valid identification documents. Then, you may be required to fill out the ownership transfer forms before accessing the shares. The same rules may apply if you are the co-owner of the brokerage account.

If there was no will, the probate process will occur. You will be required to present a probate court letter or the will of the deceased to initiate the transfer of ownership of the shares left behind.

Generally, you should follow the instructions the deceased’s financial institution gives and present all the documents you have been requested to provide. In addition, you should be prepared to create a new account and wait a while before you can trade the shares you inherit.

To ensure that your shares go to the beneficiaries you prefer, ensure that you use the TOD designation in your brokerage account or write a proper will. That way, there will be no confusion concerning where your assets should go.