What Happens To Your Stocks When You Die?
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Nicole Spector
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Molly Sullivan
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Few of us want to think about it, but the Grim Reaper will come for us all, and we each need to be financially prepared for this end of all ends. We must determine the fate of our assets, lest they end up in probate limbo.
You may have already figured out who gets your home if you own one or who gets the remaining sum in your bank account. But real estate and cash aren’t the only things you need to be thinking about. You also need to take stock of your stocks. According to a 2023 Gallup poll, 61% of Americans report that they own stock.
What happens to these assets when you die, and how can you ensure they end up where you want them to?
They’ll Go To a Joint Owner If You Have One
If you own your stocks jointly with someone else, such as a spouse, the joint owner will inherit them after you die. The same goes for bonds.
“If your investment assets have a joint owner, they will solely own these assets after your death,” said Eric Croak, CFP, president at Croak Capital. “This also applies to real estate and other jointly owned assets.”
Name a TOD Beneficiary
Most states now have the Uniform Transfer-on-Death (TOD) Security Registration Act; this allows you to designate a TOD beneficiary for your stocks.
“This is the way to go (no pun intended) if you can because it allows you to bypass probate and the delays and complications that could cause,” said Todd Stearn, founder and CEO of The Money Manual. “The TOD beneficiary would just need to follow a few simple steps to have those stocks registered in their name upon your demise.”
Put Stocks in a Brokerage Account
Putting stocks in a brokerage account (with named beneficiaries) is a smart move.
“If you have stocks in a brokerage account, you can name one or more individuals as beneficiaries,” said Michael Santiago, senior financial editor, Annuity.org. “This means that once you pass away, your beneficiaries will inherit the brokerage account in its entirety, including any stocks you held at the time of your death.
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“For instance, I have named my wife as the primary beneficiary, and if something were to happen to me, she would become the owner of my account,” Santiago said. “We have also named our children as secondary beneficiaries.”
If You Don’t Have a Will, Your Stocks Go Into Intestacy
You’ve probably already heard about just how important it is to make a formal will (either with an estate planning lawyer or through reputable online will-making software), but the importance of this really cannot be overstated. If you don’t have a will properly set up, your stocks will go into intestacy, which is basically asset limbo.
“Dying without a will means you’re intestate,” Croak said. “In intestacy, the deceased’s assets are divided based on state inheritance laws.”
This is where things can get very tricky and put quite a burden on any prospective heirs.
“Usually, the spouse of the deceased inherits first, followed by their children, then other relatives,” Corak said. “This situation can be troublesome if you have specific desires for your stock distribution.”
What If You Have No Heirs?
“What about stocks if there are no heirs?” Croak said. “If someone dies without a will and no heirs are found, their assets become state property.”
If you have no one in mind to leave your assets to, it’s still worth it to make an estate plan.
“It’s still wise to make a will, even if you don’t have family or friends to inherit your stocks. You might opt to leave them to a charity.”
Make a Postmortem Plan for Your Stocks Now
However morbid it may seem, considering the fate of your assets, including stocks, after you die is crucial.
“If you own stocks, consider their fate after your death,” Croak said. “Appointing beneficiaries, setting up (TOD) designations, and creating a will or trust can prevent your stocks from being in limbo. Knowing how to claim inherited stocks is equally crucial to preserve the financial legacy.”
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