When a person dies with an estate, he transfers not only his real estate and liquid assets, but his financial portfolio as well. This portfolio will often contain shares of stock. Unlike more liquid assets, stocks can be physically passed from one party to another without having the new ownership legally registered with relevant parties, such as the person's broker. However, in many states, stock transfer after death can be quickly expedited.
Unless the deceased made other arrangements before his death, his estate will go through probate court. A probate court is responsible for examining a person's will or other relevant documents and then determining how he wished his estate to be divided among the living. The document should provide guidance as to how the person's financial portfolio will be divided and who will receive what stocks.
With a retirement account such as an IRA or 401k, the portfolio does not actually have to go through probate. Rather, the deceased can name a direct beneficiary before his death. After the death, the person or people named as beneficiaries can go to the account custodian and have the remaining assets transferred to their own accounts. A probate court will not examine this transfer unless so requested by outside parties.
Uniform Transfer On-Death Security Registration Act
Many states have adopted the Uniform Transfer On-Death Security Registration Act. Under this act, a person can establish a beneficiary for his stocks, bonds and certain other types of assets. When the stockholder dies, then the portfolio is immediately transferred to another party without going through probate court. The beneficiary need only show the account handler the stockholder's death certificate, as well as the proper identification.
There may be some delay between the time a person dies and the time a stock is successfully transferred, even if the stock does not go through probate court. This is because it must be conclusively shown to the entity that is currently handling the stock that the original owner is now deceased. If the death is unexpected, this this may be especially true.