Letters Testamentary

A certificate is registered in the name of an individual who has since died. The certificate's executor wants it re-registered in the name of an heir. What must accompany the request to the transfer agent before this re-registration will be processed?

1. A.Appropriate estate documentation, such as a death certificate and evidence of the executor's or administrator's legal authority (for example, letters testamentary or a comparable small-estate document), since the transfer agent needs to confirm the person directing the re-registration actually has the legal authority to do so on the estate's behalf.Correct. Proper estate documentation establishing legal authority is required before the transfer agent will re-register the certificate.
2. B.Nothing beyond the executor's own verbal assurance that she has the legal authority to direct the transfer agent's re-registration of the certificate.Wrong. A verbal assurance alone is not sufficient; documented estate authority is required.
3. C.A new brokerage account opened in the deceased individual's own name, since the certificate must first be re-deposited there before any re-registration can occur.Wrong. Opening a new account in the deceased's own name is not the required step; proper estate documentation is.
4. D.Approval from the issuer's board of directors, obtained individually for every estate-related re-registration request regardless of its size.Wrong. Board of directors approval is not the required step; the transfer agent acts on proper estate documentation.

Why: Appropriate estate documentation, such as a death certificate and evidence of the executor's or administrator's legal authority (for example, letters testamentary or a comparable small-estate document), since the transfer agent needs to confirm the person directing the re-registration actually has the legal authority to do so on the estate's behalf.

Operations at Thornbury Clearing is notified that the sole owner of an individual cash account has died. Good-till-cancelled orders are resting in the account. What is the department's immediate handling?

1. A.Cancel the resting orders and restrict the account pending the estate's authority documents.Correct. The person who gave those instructions no longer exists, and nobody has yet shown a right to give new ones.
2. B.Leave the resting orders working, since the customer entered them while fully competent.Wrong. An order is an instruction to an agent, and the agency that permitted the firm to act on it ended with the principal.
3. C.Journal the assets to the named beneficiary, since a transfer-on-death designation overrides probate.Wrong. Nothing in these facts establishes any such designation, and acting on an assumed one delivers property to somebody who may have no claim.
4. D.Liquidate the positions to cash so the estate receives a fixed value.Wrong. A protective motive does not make trading without authority acceptable, and it fixes a value nobody entitled to decide has chosen.

Why: The death of a sole account owner ends the authority under which the firm was acting, so the first operational steps are defensive: cancel resting orders, block new activity and mark the account so that nothing is released. The account is then reopened in the name of the estate or the successor once the firm holds documents establishing who may act, whether letters testamentary or of administration or the paperwork supporting whatever non-probate designation actually exists. Until that arrives there is no instructing party at all, which is why every option involving further activity fails. The department is not being asked to decide who inherits; it is being asked to stop acting on authority that has lapsed.

Perrin Alsopp telephones his late mother's agent at Fennimore Crest Securities on Thursday. He explains that his mother died on Tuesday, that her will names him executor, and that he wants the account's large technology position sold immediately because the market is falling. He offers to e-mail a scan of the will and a copy of the death certificate that afternoon. What should the agent do?

1. A.Execute the sale on receipt of the scanned will and death certificate, since the will names Perrin executor.A will is not authority until a court admits it to probate. Naming someone executor is a nomination, not an appointment.
2. B.Freeze the account, accept no instructions, and act only once letters testamentary evidencing the court appointment are produced.Correct. The court's appointment is what confers authority, and until it is produced no one may give instructions on the account.
3. C.Execute the sale on the death certificate alone, because a falling market makes delay a breach of the duty to the estate.A death certificate proves death, not authority. Market conditions never substitute for proof that the person instructing may lawfully do so.
4. D.Accept the instruction but hold the proceeds in the account until letters testamentary arrive.The problem is the instruction itself. Acting on the direction of a person with unproven authority is the violation, whatever happens to the proceeds.

Why: The agent should freeze the account and take no instructions until the estate's representative has produced the court document appointing him. A will is a private instrument, and until a court admits it to probate and issues letters testamentary, nobody knows whether this will is the operative one, whether it will be contested, or whether Perrin will in fact be appointed. A death certificate proves only the death. So the correct sequence is: mark the account deceased, cancel any open orders, accept no instructions from anyone, and reopen the account in the name of the estate once letters testamentary are produced together with the firm's required documentation. The urgency of a falling market does not shorten this, because acting on the instruction of a person with no proven authority exposes the firm and the true beneficiaries alike.

Kirkbride Securities is asked to open a mutual fund account for a TESTAMENTARY trust created under the will of a customer who has died. Compared with opening an account for a living revocable trust, the firm should expect to require:

1. A.Only the trust instrument, since a testamentary trust is documented in the same way as a living trust.A testamentary trust arises under a will, so the trust instrument alone does not establish the trustee's authority.
2. B.A signed statement from the beneficiaries consenting to the account, since they hold the beneficial interest.Beneficiary consent is not how a trustee's authority is documented, and beneficiaries do not direct the account.
3. C.A durable power of attorney from the deceased settlor authorising the trustee to act after death.A power of attorney terminates on death and could never authorise post-death action.
4. D.Court-issued evidence of the trustee's appointment together with the will or the relevant trust provisions.Correct. The trustee's authority derives from the probate court, so court documentation plus the governing terms is required.

Why: A testamentary trust does not exist until the settlor dies and the will is admitted to probate, and the trustee's authority comes from the court rather than from a document the settlor can hand over during life. The firm should therefore expect court-issued evidence of the trustee's appointment together with the will or the relevant trust provisions, whereas a living trust can typically be documented with the trust instrument or a trustee certification alone.