Avoiding Probate with Stocks, Bond, Mutual Funds, and Brokerage Accounts

If you have any stocks or bonds, or mutual funds you may be holding the actual certificates, or they may be in book entry form, or they may be held in an account at a stock broker.

If the securities or accounts are in your name alone, they are probate property.

There are several ways to keep securities out of probate.  If you want the person who is to receive the balance on the account upon death to also be able to transact on the account during your lifetime, you can set it up as a joint and survivorship account.  If the securities are certificated, the face of the certificate will say “John Doe and Jane Doe JTWROS”, or sometimes “John Doe and Jane Doe Jt. Ten.”.   If the securities are held in an account at a brokerage, JTWROS or Jt. Ten. should appear on the paperwork from the broker or transfer agent maintaining the book entry accounts.

If you do not want the person you want to receive the funds upon your death to have access to your funds during your life, then the account can be set up as a Transfer on Death account (TOD).  The certificates or the broker’s paperwork, and maybe your statement will say “Richard Roe TOD Randi Roe”.

Be careful when setting up a joint and survivor account, regardless of whether it is for securities or a bank account:

  • Remember, the other person on the account is treated as a co-owner.  If the person you named wants to clean out the account, he or she as the power to do so.  If the other person has creditor problems, you might find that your account, holding stocks or bonds bought with your hard earned money, has been attached to pay the other person’s bills.
  • If you want to give someone the ability to transact on your account but want to avoid that person’s creditors from being able to attach your account, use a Power of Attorney.  That way your assets stay your own, and your agent’s creditors cannot reach your assets.
  • If you have more than one person that you want to receive the proceeds of the account upon your death, make sure that each person is named as a beneficiary.  Too often, mom or dad will set up a security account with one of their children as a joint and survivor account, to avoid probate and give the child the ability to transact on the account if “something happens.”  Legally, the child named on the account has no obligation to share the proceeds of the account with his or her siblings.  There may be a moral obligation, and most times the named beneficiary does share, but it there is no legal obligation to do so.
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We provide legal services to individuals and their businesses, primarily in the areas of Estate Planning (will, trusts, & powers of attorney), Probate, working with Small (closely held) Businesses, and Medicaid Planning.

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