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?
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®
It's frustrating, I know, that you can't do want you want to do immediately without providing the documentation necessary to establish an estate account and transferring over the assets. The brokerage industry determined decades ago that your advisor can't simply accept instructions from a third party without complying with the procedures that prove you are indeed the executor.
This FINRA document "When a Brokerage Account Holder Dies" explains the necessary process: http://www.finra.org/investors/highlights/when-brokerage-account-holder-dies
In our experience, the process of obtaining the necessary testamentary letters (esate documents) takes 2-4 weeks, establishing the estate account and transferring the assets over can be done in 1-3 days. The brokerage house should "step-up" the cost basis information on the existing positions (so that you don't incur a capital gains tax on sales.) and also provide you with an account valuation as of the date of death, which you'll need for the estate tax return.
David Edwards, President
The broker is exactly correct. The very first thing you have to do is to go to the probate court with the original will and asked the court to formally appoint you as executor of your mother's estate. This is not something you do without the probate court and all the paperwork may be cumbersome, it is critical that you do this as soon as possible. Once you are named as executor, the court will provide you with papers that you can then take to the broker and you would then close your mother's account and set up an account called an estate account. As an example, The Estate of Mildred Smith". You have to apply for a tax ID number which you can get directly from the Internal Revenue Service or your mother's lawyer or accountant may be able to help you with this. Once you have the tax ID number and the account established, the broker will then be required to transfer all the securities in your mother's name into the new estate account. Once there in the estate account, you have the authority to do anything you want and if you want to sell the securities and convert them to cash that's exactly what the broker will be required to do. Unfortunately, this is a formality that's involved in settling the estate and you happen to be caught up with this at the moment. So instead of trying to fight with the broker, my suggestions is to go to the probate court immediately, take the original will with you and be sure you've made a copy for yourself and the family and sign the necessary papers required to have you appointed as executor. It may be cumbersome, but it must be done. I sincerely hope this helps and good luck.
A power of attorney confers the power from one person to another only for the duration of the life of the person who grants it. The power ceases upon death. Your financial institution is looking for direction from the Personal Representative (PR) of the estate. If that's you then you should be able to present the will and a death certificate (and probably pay a fee) to the clerk of the court in the county where your loved one died and receive "Letters of Testamentary" which attest to your power at the PR. That power would allow you to set up an estate account and direct the disposition of the estate.
Your financial institution may have an administrative process that takes some time before an estate account is established. Until then, the account is frozen. This is inconvenient but it is both lawful and it is a best industry practice.The settlement of the estate may, in fact take a while but the process of being named Personal Representative for the estate is fairly straight forward, in most cases.