Detailed Answer
If a person who owned a brokerage account dies, moving that account’s assets into an estate checking account typically requires following Alabama probate rules and the brokerage firm’s procedures. The basic legal framework for estate administration in Alabama is found in the Alabama Code (Title 43), which governs wills, administration, and the duties of a personal representative. For full statutory text, see the Code of Alabama (Title 43): https://www.legislature.state.al.us/alison/codeofalabama/1975/1975home.html.
Below is a clear, step-by-step explanation of how the transfer usually works and what you will need to do in Alabama.
Step-by-step process to move brokerage assets into the estate checking account
- Identify how the account was titled or whether it had a beneficiary designation. Brokerage accounts may be (a) individually titled in the decedent’s name, (b) joint with rights of survivorship, (c) payable-on-death (POD) or transfer-on-death (TOD) with a named beneficiary, or (d) owned by a trust. If the account names a beneficiary or is joint with survivorship, the broker may transfer the account to that person without probate. If it was solely in the decedent’s name with no beneficiary, the account normally becomes part of the probate estate.
- Locate the will and gather account documentation. Find the decedent’s will (if any), recent account statements, and any beneficiary designation forms. These documents help you determine who has authority and whether probate is necessary.
- Notify the broker and provide required documents. Contact the brokerage firm’s probate/transfer department. Typical requirements include: a certified copy of the death certificate, proof of your identity, and proof of your authority (see below). The broker will tell you whether they will freeze the account, allow a beneficiary transfer, or require court authority.
- Obtain court-issued letters if the account must go through probate. If the account is part of the probate estate, you (or the person named as executor in the will) must be appointed by the probate court as the personal representative (sometimes called executor or administrator). The probate court issues letters testamentary or letters of administration showing your authority to collect estate assets. Those letters are the document most brokers require before they will transfer or liquidate securities held in the decedent’s name. The probate process and appointment of a personal representative are governed by Alabama probate statutes (Title 43).
- Get an EIN for the estate and open an estate checking account. Banks generally require the estate’s Employer Identification Number (EIN) from the IRS to open an estate checking account. Do not use the decedent’s Social Security number for estate banking. You can obtain an EIN online from the IRS: https://www.irs.gov/….
- Instruct the broker how to transfer assets. Once the broker has verified your authority (letters) and the estate bank account is open, instruct the brokerage to transfer assets. Brokers typically offer two options: (a) transfer securities in-kind to the estate brokerage account or (b) sell the securities and transfer cash proceeds to the estate checking account. Document all instructions in writing. The broker may require transfer forms, a medallion signature guarantee for securities, or additional fiduciary paperwork.
- Record values and report to the probate court. Alabama law requires the personal representative to inventory and account for estate assets. Record the date-of-death values (or sales proceeds) and include them in the estate inventory required by the probate court. See Alabama probate law (Title 43) for requirements on administration and inventories: Title 43 – Code of Alabama.
- Pay debts, taxes, and distribute under the will or intestacy rules. Use the estate checking account to pay valid claims, funeral costs, taxes, and administration expenses before distributing remaining assets according to the will or Alabama’s intestate succession rules.
What brokers typically require from a personal representative
- Certified copy of the death certificate.
- Letters testamentary or letters of administration issued by the probate court (showing appointment as personal representative).
- Personal identification and contact information for the fiduciary.
- Completed transfer forms provided by the brokerage.
- Estate bank account information and the estate EIN (to receive cash).
- Sometimes a medallion signature guarantee for certain transfers of securities.
When probate may not be necessary
Some accounts avoid probate entirely: accounts with a valid beneficiary designation (POD/TOD), accounts held jointly with a survivor, or accounts owned by a living trust may transfer outside probate. If you believe a TOD/POD designation exists, contact the broker and provide the beneficiary’s identification and the decedent’s death certificate to claim the asset. If the value is small, Alabama may also offer simplified or small‑estate procedures through the probate court—check local probate court rules or consult counsel for details.
Tax and valuation considerations
When you transfer or sell securities, consider tax consequences. For federal income tax purposes, assets may receive a stepped‑up (or stepped‑down) basis to fair market value at the date of death. Keep accurate records of the date‑of‑death values and any sale proceeds. Work with a tax advisor or CPA to prepare estate tax filings (if required) and the decedent’s final income tax return.
When to get legal help
If the estate is large, contested, or the broker or beneficiaries dispute entitlement, consult an Alabama probate attorney. An attorney can help you: petition the probate court, obtain letters, prepare the inventory and accounting, handle creditor claims, and advise on tax issues. Remember that probate practice varies by county; local counsel can explain county-specific forms and timelines.
Quick checklist for executors in Alabama
- Find the will and recent account statements.
- Contact the brokerage firm’s probate or transfer department.
- Order certified death certificates (brokers usually require several copies).
- File for appointment as personal representative with the local probate court (if needed).
- Obtain estate EIN from the IRS and open an estate checking account.
- Provide the broker with letters, death certificate, and transfer instructions.
- Record values, sell or transfer assets as appropriate, and deposit proceeds to the estate checking account.
- Pay valid claims and distribute assets under the will or Alabama law.
Helpful Hints
- Act promptly but carefully. Brokers often put holds on accounts when notified of a death; don’t authorize unnecessary sales before you understand the tax and probate consequences.
- Keep original certified death certificates in a secure place; brokers and banks require certified copies, not photocopies.
- Obtain multiple certified copies of the death certificate at the time you order them; different institutions each want originals.
- Get the estate EIN before opening the estate checking account—banks will generally not accept the decedent’s SSN for estate banking.
- Ask the broker if they accept scanned copies initially to freeze the account, but understand they will usually require certified documents before transferring assets.
- Keep meticulous records of every transaction, communication, and fee. You will need them for the estate inventory and final accounting to the probate court.
- If a beneficiary claims a TOD/POD transfer, get that claim in writing and verify the beneficiary designation in the broker’s records.
- Consider engaging a probate attorney in your county early if the estate contains complex assets (non‑publicly traded securities, restricted stock, significant retirement plans, or disputes).
Disclaimer: This information explains general Alabama probate practice and common brokerage procedures. It is educational only and not legal advice. Laws change and facts matter. Consult a licensed Alabama probate attorney for advice tailored to your situation.