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Investor Protection

When a Brokerage Customer Dies - Tips for Heirs and Beneficiaries

September 10, 2020

By Howard Haykin



When a Brokerage Account Holder Dies - What Comes Next?   Death is an unavoidable fact of life - and of financial planning. When it comes to the death of a brokerage account holder, many firms have trained staff and resources to help the living address estate matters such as how account assets will pass to heirs and beneficiaries. While specific procedures vary, brokerage firms tend to follow a fairly similar process of transitioning account assets to an account holder's heirs and beneficiaries.
[For a glimpse as to what can go wrong in the transition process, click on Financialish post, Deceased Customers Don't Trade.]



FINRA further recommends that heirs or beneficiaries to brokerage account assets take the following steps, which can help smooth out the asset transition process:


►    Notify the firm in a timely manner of an account holder's death. If you aren't sure whether the deceased had a brokerage account, keep an eye out for account statements or other indications that an account exists.


►    Know what you own. Upon taking ownership of the account assets, take time to understand your investment holdings and determine whether they are right for you. In particular, learn about the risks of each investment, if there are any restrictions on when you can sell the investment (liquidity risk) and any fees or other costs associated with the investment.


►    Investigate the pros and cons of selling investments. If you plan to sell assets, there likely will be costs and tax consequences from the sale. Selling decisions should align with your overall investment objectives. Consider consulting a tax advisor for guidance.


►    Assess whether the current firm and broker are right for you. You are not required to stay with the deceased person's firm or the broker who handled the account - and you should not be pressured to do so. That said, don't feel compelled to transfer your account to another firm, and don't transfer assets or buy new ones without doing your due diligence about the firm, investment professional and investments - i.e., by referencing FINRA's BrokerCheck database.


►    Understand that not every brokerage account transfer situation is trouble-free. But coming into the process with a sense of what to expect from the deceased person's brokerage firm, and what the firm will likely ask of you, can help make the transition less confusing.



For further guidance, click on any of these other posts: