My mother’s advisor says he can’t sell any stocks in her account. Could he possibly be right?

My mother passed away a few weeks ago. She did not have a trust and I am executor in probate. I had power of attorney before she passed away and that document doesn’t specifically say the power ends upon her death. She left five heirs who want to assure that their inheritance is not going to be subject to market risk before it is distributed. Settling the estate is going to take many months. I told her advisor to liquidate most of her portfolio but he said the brokerage firm has frozen the account. What can be done?

Estate Planning, Asset Allocation, Choosing an Advisor, Stocks
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May 2018

I am sorry for your loss.  This is a tricky one but you, as Executor of Her Estate, have the Fiduciary obligation to protect the estate.  So you cannot invest "offensively" by buying trying to make money, but you can defensively sell if you deem a stock or the whole market in general is dangerous.  You tell your broker that you have a Fiduciary responsibility to protect the estate and want to protect the principal/corpus.  Therefore, you are providing him written instructions to liquidate and move to cash until the estate is distributed.  If he cannot do that, then ask him personally and his firm to put in writing why they will not allow you to fulfill your Fiduciary duty to protect the estate.  They may tell you that once a person dies, the estate is frozen until they get the Letter of Testamentary from the Probate Court/Judge assigning the Executor (You).  Then they will open an Estate Account & transfer all of the assets into the account from your mother's account.  Tell them you have no problem in transferring the gross assets into the estate account & follow estate protocol, but first you must protect and secure the estate.

This will normally make them acquiescue, but if they still don't then ask to speak with their compliance & legal department - and ask them to put in writing too if they refuse. I am an RIA but just went through this very same scenario with my Dad who passed away end of last year.  The account was at a major, discount brokerage firm (that I will not name as I have lots of money there but they are all the same).  That said they were going to freeze the account & I said OK as long as the market is acting right, but as soon as I see weakness, I want to liquidate or at least "split the middle" as I would rather be safe than sorry.  The Executor completely agreed.  End of January we sold half of all of the positions and there was already 10% cash in the account so we ended up with 40% equities & 60% money market until it was transferred to the ByPass Trust a few weeks later.  

The whole point of this diatribe is that you must be an advocate and Fiduciary for the beneficiaries and you must be firm or possibly downright ugly.  But I believe they will succumb if pressed.  If not, talk to your estate attorney.   

Hope this helps and best of luck, Dan Stewart CFA®

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