TRADING IN A DECEASED PERSON'S ACCOUNT?

[antelopedundee]

What possible penalty could a person face for trading in a deceased person's brokerage account? I have a brokerage account with a POD Pay On Death beneficiary. If I croaked unexpectedly I would like the POD bennie to liquidate all positions and once settled, transfer the funds to another POD account making it easier to claim the money. What would be the ramifications of doing this?

 

[popeyoung12]

Have a trust and will. Right now, the 1st 12 million of inheritance is tax free. Right your own obit. And get rid of any crap you haven't touch in 2 years. Gotta have the estate planning. And they can't trade in your acct. When u r pushing daisy's. Get a Cfp.

 

[antelopedundee]

But what penalties might be inflicted if they trade in your account after yer dead Fred?

 

[popeyoung12]

The SEC will not be happy, and they will be caught. Just get a cfp, trust/will, all legal. I just went thru this. Do it legal.

 

[popeyoung12]

But what penalties might be inflicted if they trade in your account after yer dead Fred?

Federal felony unless u r a Biden.

 

[popeyoung12]

But what penalties might be inflicted if they trade in your account after yer dead Fred?

Why would they do that? They are smarter then a cfp and will dodge the sec and irs...? You have no clue what needs to happen after an heir inherites assets.

 

[Big Fin]

No penalty. POD/TOD designation makes it non-probate property, thus not subject to will/trust/probate. It immediately becomes the property of the named transferee.

 

[popeyoung12]

No penalty. POD/TOD designation makes it non-probate property, thus not subject to will/trust/probate. It immediately becomes the property of the named transferee.

Assuming there are named trustees.

 

[Big Fin]

Assuming there are named trustees.

??? Hmmm, "trustee" doesn't apply to a POD/TOD account.

To have a valid POD/TOD you must have a designated Transferee/Beneficiary. OP said he has a named POD Beneficiary, making it a valid account designation.

 

[popeyoung12]

??? Hmmm, "trustee" doesn't apply to a POD/TOD account.

To have a valid POD/TOD you must have a designated Transferee/Beneficiary. OP said he has a named POD Beneficiary, making it a valid account designation.

And the op has that? Idk?

 

[antelopedundee]

Why would they do that? They are smarter then a cfp and will dodge the sec and irs...? You have no clue what needs to happen after an heir inherites assets.

The transferee on death would need to send at least a copy of the TOD and death certificate to the brokerage in order to claim the funds FROM THEM. The brokerage has a copy signed by me. But there is a simpler way. Simply sell all positions in the account and when cleared transfer said funds to the linked bank account which is also assigned to the transferee. Simply present the bank TOD form [and death certificate] to the bank and claim the funds. Done in 4-5 days at most or as soon as the transferee can get a DC. The account can sit for all I care because it contains a worthless security which was never properly removed from the account by one of the several owners of the brokerage. The executor will still need to get the 1099-B from the brokerage at tax time.

If I was to pass unexpectedly it would seem that the above approach would be the preferred way to get quick access to the funds. If I have time to act before my demise I would take care of things. The purpose of the brokerage account is to provide funds for my grandson's higher education.

 

[antelopedundee]

And the op has that? Idk?

Yes. The brokerage account and a linked bank account are both covered by POD/TOD.

 

[Tradewind]

If you are talking commodities, all positions have to be liquidated upon notification of the deceased.
Stocks are a different deal

 

[westbranch]

The transferee on death would need to send at least a copy of the TOD and death certificate to the brokerage in order to claim the funds FROM THEM. The brokerage has a copy signed by me. But there is a simpler way. Simply sell all positions in the account and when cleared transfer said funds to the linked bank account which is also assigned to the transferee. Simply present the bank TOD form to the bank and claim the funds. Done in 4-5 days at most. The account can sit for all I care because it contains a worthless security which was never properly remove from the account by one of the several owners of the brokerage. The executor will still need to get the 1099-B from the brokerage at tax time.

If I was to pass unexpectedly it would seem that the above approach would be the preferred way to get quick access to the funds. If I have time to act before my demise I would take care of things. The purpose of the brokerage account is to provide funds for my grandson's higher education.

If you do it your "simpler" way without providing the death certificate to the broker to adjust basis in the account that 1099B will be incorrect. It can be corrected later on but easier to do it right initially.

You are also risking having the account frozen if trading is done in the deceased name before the TOD is processed. No fines/penalties but extra paperwork and processing time. Have them follow the normal TOD procedure which is as easy as it gets.

 

[SAJ-99]

What possible penalty could a person face for trading in a deceased person's brokerage account? I have a brokerage account with a POD Pay On Death beneficiary. If I croaked unexpectedly I would like the POD bennie to liquidate all positions and once settled, transfer the funds to another POD account making it easier to claim the money. What would be the ramifications of doing this?

As with most of these type questions, the details are a bit incomplete, so I have to assume some things. There is a process that should be followed, slightly different than what you described. Officially, no activity should take place until the broker is notified of the death. Then the bene can decide. If something happened before notifying, As long as it’s the Bene, no penalty, because who else would have your login to the account? A possible other example, if someone else found the login and decided to YOLO on some short dated options and lost a bunch of money, the bene would have to go to court to recover from the YOLO’er. The SEC is not the enforcement body in this case.

The details matter because of the taxes and if they are assigned to the estate or the bene after death. Consult an accountant on IRS cost basis rules.

(Edit: looks like someone jumped in on that while I was typing, )

 

[antelopedundee]

If you do it your "simpler" way without providing the death certificate to the broker to adjust basis in the account that 1099B will be incorrect. It can be corrected later on but easier to do it right initially.

You are also risking having the account frozen if trading is done in the deceased name before the TOD is processed. No fines/penalties but extra paperwork and processing time. Have them follow the normal TOD procedure which is as easy as it gets.

If I did it my way there would be nothing to freeze as the account would have zero balance. My son has a custodial account for his son so I hope the funds would end up there. This whole scenario is based on my demise being unexpected so there's that. If there is no penalty to trade then what's the risk? Notifying them would not be a priority. They would however, get notified when the BENE of the Roth IRA that I also have there submits a claim for those funds. Right now it's a hypothetical situation as I'm alive and somewhat well.

 

[westbranch]

If I did it my way there would be nothing to freeze as the account would have zero balance. My son has a custodial account for his son so I hope the funds would end up there. This whole scenario is based on my demise being unexpected so there's that. If there is no penalty to trade then what's the risk? Notifying them would not be a priority. They would however, get notified when the BENE of the Roth IRA that I also have there submits a claim for those funds. Right now it's a hypothetical situation as I'm alive and somewhat well.

Might be fine. When the broker is notified of the date of death for the Roth the zero balance account could get flagged for fraud and then the broker would notify the bank that funds were ACH'd to. Then that bank would do its own investigation. Your executor gets to deal with a nice cluster of sorting things out.

Instead of "hoping" something happens just have it setup now and then your executor can follow the process and things will go smoothly.

 

[antelopedundee]

Might be fine. When the broker is notified of the date of death for the Roth the zero balance account could get flagged for fraud and then the broker would notify the bank that funds were ACH'd to. Then that bank would do its own investigation. Your executor gets to deal with a nice cluster of sorting things out.

Instead of "hoping" something happens just have it setup now and then your executor can follow the process and things will go smoothly.

The onus is on the transferee to present his copy of the TOD and DC in order to claim the funds. Naming a TOD beneficiary takes the executor out of the picture.

 

[antelopedundee]

No penalty. POD/TOD designation makes it non-probate property, thus not subject to will/trust/probate. It immediately becomes the property of the named transferee.

So if there is no penalty for someone selling positions in the account BEFORE notifying the brokerage that the account owner is deceased then what other ramifications would/could there be?

 

[Big Fin]

So if there is no penalty for someone selling positions in the account BEFORE notifying the brokerage that the account owner is deceased then what other ramifications would/could there be?

None that I'm aware of, if you have everything in order.

You will probably be asked by the institution to show proof of being the TOD/POD beneficiary if you ask to withdraw from the account. That usually requires a death certificate of the original account owner, documentation to prover the new account owner, at a minimum.

Selling the positions isn't that big of an issue if the assets stay within the account, which is the original scenario. The real test for proof of ownership will come when the successor account owner tries to withdraw funds.