In many cases a person dies owning investments such as stocks, bonds, mutual funds and other financial assets. During the administration of the probate estate or trust estate, the personal representative or trustee, as the case may be, will be required to take possession and manage these investments.
Investment of Securities.
As a personal representative or trustee you will fall under the definition of a fiduciary. Most states require that fiduciaries manage and invest these assets as would a prudent investor. This means that you must use reasonable care and caution in managing the investment portfolio. Remember, you are holding and managing the property for the benefit of the beneficiaries. This means you must tailor the risk and return objectives with these beneficiaries in mind. Unless you have special expertise in these matters, you should hire an investment advisor to assist you.
Hiring an investment advisor will generally reduce your liability for management of the assets. However, you must 1). Exercise reasonable care and judgment in selecting the advisor; 2). Carefully negotiate and establish the scope and term of the advisors authority; and 3). Regularly review the advisor's actions to make sure he complies with the scope and terms.
Shortly after accepting your duties as personal representative or trustee, you should determine exactly what financial assets the decedent owned. You should review these investments and make a decision as to whether you want to retain the portfolio as is or make changes. Many times these decisions are made to meet the prior wishes of the decedent or the needs or desires of the beneficiaries. It is important to realize that you bear the ultimate responsibility and liability for these decisions. If it was the decedent's wish that you retain his investment in the stock of a certain company, and you adhere to those wishes and the company stock plummeted, you can bet that the beneficiaries will hold you accountable for that decision. You will be judged not on your loyalty to the decedent, but weather your decision was prudent under the circumstances.
As with any other investor, you have a duty to diversify the investment portfolio. You also must give consideration to the fact that you will eventually have to distribute these assets to the beneficiaries. As a result, your investments should have a certain level of liquidity. You must protect and preserve the assets during the administration of the estate. This means ensuring the assets against loss or damage.
The financial assets of an estate are usually the source of payment of the decedent's debts, and the expenses of administration. Therefore, you also have a duty to invest to preserve the assets, not only for the benefit of the beneficiaries but also the creditors of the estate.
One of the first things you will need to do is to calculate the liquidity requirements of the estate in order to pay expenses and debts. If there is not sufficient liquidity to cover these costs, you'll need to convert assets into cash. These may include stocks, bonds and even real estate
If the decedent owned stocks, bonds or other types of securities in certificate form, it may be necessary for you to liquidate them or transfer them to the beneficiaries. First of all, if you are working with a securities broker, I would strongly suggest that you employ the broker to handle this chore. It will be well worth the fee and greatly simplify matters for you. If you must handle this yourself, you should first determine who the transfer agent is for the particular stock. This can usually be found on the company's (on the stock certificate) website. Contact the transfer agent and find out exactly what documents they will need to complete the transfer and get a detailed list of the procedures. Many transfer agents have their own document forms and will send them to you either electronically or by mail, upon request.
Before beginning this task, there are certain documents you should prepare:
1. Evidence of your authority. This will consist of the letters of administration, letters testamentary or other court document appointing you if you are acting as personal representative or executor. If you are acting in the capacity of trustee, you will need to provide a copy of the trust (or at least the portion showing you as successor trustee) and an acceptance of trustee form.
2. Evidence of decedent's death. This is usually the death certificate.
3. Affidavit of domicile to show that the decedent was a resident of the state where the transfer takes place.
You will need to complete and execute the forms sent to you by the transfer agent. Proper execution of these forms will require a Medallion signature guarantee obtained from a bank or stockbroker. You must sign the document in their presence. A Medallion signature guarantee is a signature guarantee under the Medallion Program, which was set up to ensure the validity of signatures in the transfers of securities and similar cases.
When sending these documents, especially the original security certificate, you should use insured registered mail or overnight delivery such as Federal Express or UPS.
Learn more about administering an estate with step by step directions, checklists and forms from Dean Hanewinckel's E-Book, What To Do When A Loved One Dies - A Survivor's Guide. You can order it at http://www.floridaprobatesecrets.com. Dean Hanewinckel is a probate, estate and legacy planning attorney in Southwest Florida. He is the author of 3 books. In addition to What To Do When A Loved One Dies, he has published Manifest Your Legacy and The Official Snowbird's Guide To Becoming A Florida Resident, both available at Amazon.com.
[Editor's Note: For information on transferring securities to a living trust, see our section entitled, "Transferring Intangible Property to a Living Trust."]