What happens when a trader dies?

[The Bear 10]

This may be a morbid question, but does anyone know what happens to our brokerage accounts if we were to die?

 

Meaning, is the executor of our will allowed to call up the broker and ask him to liquidate all positions, and can he close the accounts, or can it only be done by a lawyer via written letter?

 

The problem is, I would want to make it as easy as possible for my gal to get her money if I croak, but with the least amount hassle.

[Knyyt 10]

Depends alot on how you opened the account. Joint w/ rights of survivorship, etc,etc. And yes, they would definately need alot of paperwork to liquidate the account if you held it as an individual account.

If i were you i would definately send out an email to your broker and ask them, dont just take someones ( my ) word for it on a forum.

 

Regards, Knyyt

[TinGull 10]

It can be very tricky. My mother had passed away in June, and just recently were all of her stocks transferred out of her name into mine and my sisters, and eventually transferred into other assets. A lot of work with accountants and lawyers before hand definitely made it easier, as my grandmothers' accounts took much longer to deal with because she had been fussing with it just before she passed.

 

Definitely talk with your brokerage first, and then an account/lawyer team. I don't know how things get executed, I just know it can be tricky.

[brownsfan019 17]

Bear - from my time as a stockbroker, I can offer some advice, but as another stated - talk to your broker, attorney, and/or cpa's about this topic.

 

At the brokerage firm I worked at, we had what was called a Transfer on Death (TOD) agreement. Most major firms have this. With a TOD, once I got the death certificate, I could have stocks/funds/etc transfered to the appropriate people within days if the receiving person(s) had an account at the firm. If not, they simply had to open an account and then the transfer would take place.

 

Again, you need to discuss this with the firm(s) that you are using. One disadvantage to using online firms is that you have to do the leg work yourself. If you are at a Merrill Lynch or such, you make one call and then someone else does the leg work. Of course, you pay for this as well.

 

The catch - I have yet to see this in the futures industry. Having come from a stock brokerage background and now a full-time futures trader, I can tell you that the futures brokerages are WAY behind in terms of this kind of stuff - proper estate planning documents, statements, online services, etc. As far as I am concerned, the futures industry is decades behind the major stock brokerages out there. I mentioned once to Eliot at Mirus Futures that with my knowledge of the stock side and his knowledge of the futures side, we could create a futures FCM that was actually customer friendly...

[The Bear 10]

Thanks guys this helps alot. I'll look into each of your e-mails.

 

This looks very ugly, and possibly costly for the beneficiary. Accountants and lawyers could make up stories and charge the hell out of the estate for these procedures? I have been noticing in a will book that the beneficiaries can sue the lawyers if the fees are outrageous, BUT, with nothing to compare to, and the beneficiary I want has almost no business sense..they could be left with substantially less.

 

The worst is, what if we were in a overnight futures position and then we died, and it was creeping up to expiration...the broker would liquidate it automatically? I think this is something specific to the broker, I need to look into this.

[TinGull 10]

What I learned from my mothers will is nothing can be left to interpretation. If you specify that the money in said futures account is to be given to the beneficiary free and clear once all positions are liquidated, that has to happen by law. There's no if's and's or but's about that.

[brownsfan019 17]

Bear - like tin said, I think the key here is get proper documents in place with an attorney before they are needed. You need to document the proper way you want things handled and then I recommend you give these to your broker(s) so they have them on file already.

 

Proper estate planning is not cheap. Your other option is to let your state decide how things are to be divided out at time of death. I would highly recommend you avoid this option at all costs.

 

As for futures, it's just plain ugly. Perhaps an FCM exists that treats estate planning differently, I just have yet to find one. If anyone knows of a futures FCM with a TOD agreement or similar, please post it here! Since the futures industry is way behind in estate planning, you need to take the proper precautions with a qualified attorney.