Transfer inherited stocks - problem with current broker

[jpjr]

Perhaps I am getting a bit too wired about what I perceive to be an effort to make us open an account with my recently passed mother in law's broker.

There are stocks to be transfered on a "Transfer on Death" basis. We have offered a copy of our brokerage account number with Vanguard, but the current broker is making us open a new account in our name with them to which the stocks will be transferred and then they will start the process of dealing with Vanguard. Am I being too paranoid about their requirement or is this something that is a normal procedure?

Thanks in advance for your insight.

jpjr

 

[Qs Laptop]

Perhaps I am getting a bit too wired about what I perceive to be an effort to make us open an account with my recently passed mother in law's broker.

There are stocks to be transfered on a "Transfer on Death" basis. We have offered a copy of our brokerage account number with Vanguard, but the current broker is making us open a new account in our name with them to which the stocks will be transferred and then they will start the process of dealing with Vanguard. Am I being too paranoid about their requirement or is this something that is a normal procedure?

Thanks in advance for your insight.

jpjr

I'm no lawyer but I'd say if you have a death certificate and clearly are the heirs (there should have been a beneficiary form filled out by your mother-in-law), there should be no reason to open an account at this brokerage only to move the money twice and then close two accounts.

Perhaps your mother-in-law's broker thinks if you open an account there you will stay there. "Hey, you've opened an account here, just stay."

Let's hear what others on ER have to say about it.

 

[steelyman]

Do you want them transferred in kind? That is, retaining the cost basis?

 

[jpjr]

We will be tranferring in kind, and then deal with the sale or retaining of stocks once in Vanguard.

 

[euro]

I think this is pretty common if you want to transfer the shares "in kind". I believe that it is easier for them to transfer "in kind" if the names on the transferring and receiving accounts are a match. For example, I find this to be the case when I want to transfer shares from my Fido trustee account to my Schwab DAF account. It is much easier if I first move the shares within Fido from the Trust account to a regular brokerage account (in my name), and then initiate the transfer to Schwab from there.
If you just want to liquidate the position and have them cut you a check then you should not need to open an account.

 

[steelyman]

We will be tranferring in kind, and then deal with the sale or retaining of stocks once in Vanguard.

I had a similar question (with stocks currently held at Schwab, destination Fidelity) and the advice I was given was to initiate the transfer from the destination brokerage and to retain the basis.

 

[euro]

We will be tranferring in kind, and then deal with the sale or retaining of stocks once in Vanguard.

Yes, then you need to follow their process. Not the end of the world, just open the account, do the transfer, close the account.

 

[euro]

I had a similar question (with stocks currently held at Schwab, destination Fidelity) and the advice I was given was to initiate the transfer from the destination brokerage and to retain the basis.

I don't think retaining the basis matters here as this is an inherited account, so OP will have stepped up cost basis anyway?

 

[steelyman]

I don't think retaining the basis matters here as this is an inherited account, so OP will have stepped up cost basis anyway?

I guess that depends on when the original owner died. In my case, the owner died in 1994.

 

[cathy63]

This is pretty normal. I don't think there's a legal requirement to do it this way, but it's a standard policy at many brokerages to open a new account at their own firm in the heir's name, move the shares, and then reset the basis to the decedent's date of death. From there the heir can do what they like with the assets. Then if the assets are sold or transferred to a different broker, the proper cost basis goes with them and everything is correctly reported on your 1099s later.

If this is your spouse's inheritance rather than a joint bequest, the broker may require a separate account in spouse's name. If that's the case, I suggest you speak to a real person at Vanguard when you initiate the transfer so they understand that the two accounts are titled differently and can advise you on how to make the transfer as seamless as possible.

 

[jpjr]

Thanks all, we have initiated the paperwork for a "new" account with the current broker and once established will immediately transfer to Vanguard. My wife has her own Vanguard accounts with Regular and Roth IRAs, and she recently established a new non-retirement account specifically to accept the stocks. We will be able establish the stepped up basis effective the date of her mom's death earlier this month. Who knows, the way the market is going, we may well have a capital loss to report.

 

[RetiredHappy]

Thanks all, we have initiated the paperwork for a "new" account with the current broker and once established will immediately transfer to Vanguard. My wife has her own Vanguard accounts with Regular and Roth IRAs, and she recently established a new non-retirement account specifically to accept the stocks. We will be able establish the stepped up basis effective the date of her mom's death earlier this month. Who knows, the way the market is going, we may well have a capital loss to report.

Does the brokerage firm establish the cost basis on date of passing or is it something that you will have to manually update into the system?

 

[jpjr]

I am not anticipating any real assistance from the current broker who has been less than helpful thus far. Given there should only be a few stocks (we have not been informed to the number or the amount yet) I am confident we can research the early August stock prices at her time of death to establish the stepped up basis.

 

[MRG]

Please listen to them, don't transferi nto your existing account. I transferred my DFs assets to my brokerage account to have the account locked by the state he died in so they could collect inheritance tax .

 

[RobbieB]

I don't see any problem with it.

 

[euro]

I guess that depends on when the original owner died. In my case, the owner died in 1994.

Of course, you are right then - OP said "recently passed", so I assumed it probably wasn't that long, but sure, even if it was a year or two ago, it could make a significant difference.

 

[RunningBum]

When I read up on how Vanguard TOD works, upon death the beneficiaries must open an account at VG (if they don't already have one) to get the shares transferred. Once shares are there, they can transfer them out or do whatever they want with the account. This is the reverse of the OP's situation but I'm not at all surprised to see it work that way at other holding company.

 

[Sunset]

When I read up on how Vanguard TOD works, upon death the beneficiaries must open an account at VG (if they don't already have one) to get the shares transferred. Once shares are there, they can transfer them out or do whatever they want with the account. This is the reverse of the OP's situation but I'm not at all surprised to see it work that way at other holding company.

Yes, this is how it is done at Vanguard, we have gone through it.
They also sent a letter to the deceased for each time a beneficiary completed the task and got their portion.
It worked quite well.

 

[RunningBum]

Yes, this is how it is done at Vanguard, we have gone through it.
They also sent a letter to the deceased for each time a beneficiary completed the task and got their portion.
It worked quite well.

Did they distribute to people who already had an account, or who quickly set up an account, before others set up an account? I had heard something about them (or maybe another place) holding funds until all beneficiaries set up their account.

 

[ERD50]

Your current broker may well be doing it as required. From what I understand, you can't transfer and change ownership/type in one step. As an example, I could not move my Trad IRA and convert it to a Roth at a different broker at the same time. I had to either convert to Roth at current broker, and then move the Roth to a new broker, or... move the Trad IRA to a new broker, and then convert it to a Roth.

I think the same applies to any change in ownership as well, which a TOD would be doing (one name gets dropped).

But then, initiate the transfer from the place you are transferring to (Vanguard in your case). IME, and others here, it goes much better that way. The place that is losing the account may find ways to drag their feet on a persona request (they'll want you to talk to a sales person, etc), but I think they have to respond to a request from Vanguard or other broker.

When I helped settle my MIL/FIL estate, we did the same for their stocks/funds. I don't recall if it was required or not, but I figured it was simpler to get everything transferred at Fidelity (where MIL/FIL account was), then each of DW's siblings could do as they please with it. Since one was out of state, we all met at Fidelity when they were in and got it done in one shot.

Grandchildren also got a share, I didn't want to deal with getting them to set up brokerage accounts, so I liquidated enough and offset some small losses with small gains to minimize tax effect and to free up cash for the g-kids. Stocks/funds that appreciated since FIL's passing a few years earlier were transferred in-kind so each of the siblings could do what they want in terms of liquidation and taxes.

-ERD50

 

[Montecfo]

I think this is normal procedure. Not a big deal.

 

[Sunset]

Did they distribute to people who already had an account, or who quickly set up an account, before others set up an account? I had heard something about them (or maybe another place) holding funds until all beneficiaries set up their account.

In our case, Vanguard distributed to the person who already had a Vanguard account, as the others didn't and didn't bother to set one up until about a week later.
Everyone used the same starting point (link) on the Vanguard site, that helps people claim.
Only the first person needed to include the death certificate.
Each of the others got their portion after they set up their account, without waiting for all to be done.

Now Bank of America told us, if 1 person does not claim the TOD, nobody gets the money . So I got everyone's paperwork together and submitted it (fax) myself, as I couldn't trust one person to get around to doing it.

 

[disneysteve]

There are stocks to be transfered on a "Transfer on Death" basis. We have offered a copy of our brokerage account number with Vanguard, but the current broker is making us open a new account in our name with them to which the stocks will be transferred and then they will start the process of dealing with Vanguard. Am I being too paranoid about their requirement or is this something that is a normal procedure?

I just went through this with my cousin's estate, moving an inherited IRA from Wells Fargo to Vanguard. It was actually Vanguard that required me to open a new account at Wells Fargo first. They wouldn't accept the transfer unless the accounts were titled the same. So I had to have WF open an inherited IRA and then it could be transferred to the new inherited IRA at VG.


So I'd say this is pretty normal.