Selling Deceased Estate Shares

One of the more time-consuming tasks during Estate Administration is identifying and keeping a record of the assets of a Deceased Estate. During this step, one of the biggest questions posed usually concerns what happens with those assets left behind, including selling Deceased Estate shares.

In most cases, the Will of the deceased serves as the primary basis for the disposition of property and assets. But what happens if there is no Will left behind? And how do you even know if the deceased held any shares if they never talked about it when they were alive?

As Estate Administration professionals, we’re here to help you out. In this article, we’ll answer your most pressing questions regarding Deceased Estate shares and how to manage them.

1. How to Determine if the Deceased Person Held Any Shares

In the course of finding any assets of the deceased, you need to keep a file of documents that indicate ownership or purchases of shares. When it comes to selling Deceased Estate shares or stocks, be on the lookout for Australian Securities Exchange Ltd (ASX) letters, share certificates, bank accounts, trade platform accounts, invitations to Annual General Meetings (AGM) and similar documentation.

2. Public Company Shares (Stock Exchange) vs Private Company Shares

Knowing the difference between share characteristics is crucial to ascertain the deceased shareholder’s interest in a specific company. The kind of shares belonging to a Deceased Estate also plays a significant role in determining the value of the shares.

2.1 Public Shares

You may have heard about publicly traded company shares and privately held shares. Public company shares are traded on an established stock exchange, such as the ASX, which allows anyone to buy and sell shares in the public market.

2.2 Private Shares

Privately held company shares are not traded publicly via a stock exchange, and they require private transactions based on existing securities legislation and a (usually) shareholders’ agreement containing the rules and procedures about the transfer of shares together with any conditions.

3. What Happens to Shares When a Shareholder Dies?

When there is a Will and the deceased had expressly stated their wishes as to the distribution of their assets (including selling shares from a Deceased Estate in Australia), and assuming Probate has been granted, the Executor need only execute the instructions of the deceased in line with any shareholder conditions. This may include the disposition of assets after all Estate liabilities or debts have been paid.

In relation to shares, the wishes of the deceased usually take the following forms:

3.1 Gifting of Shares

The deceased may pass the shares on or transfer them to a Beneficiary as a gift or bequest. In such cases, the Executor is tasked to contact the broker (for public company shares) or the company (for private company shares) and notify them of the death of one of their shareholders. Through this communication, the Executor could also obtain pertinent details about the shares and potential dividends, as well as what supporting documentation must be provided.

Note that the transfer of different types of shares and securities might entail different applications and requirements. Moreover, if the shares are to be transferred to the Executor who is also a named Beneficiary, the Executor needs to file a separate application and is usually required to submit certified documents proving the Grant of Probate.

Any Beneficiary or person inheriting estate assets should keep a record of the transfer of shares for the purpose of understanding capital gains tax implications. If, for any reason, you are unsure about the next steps you should take or any specifics concerning Deceased Estate shares or stocks, talk to a financial planner or tax specialist.

3.2 Selling Shares of a Deceased Person

Another way the deceased might decide is by leaving instructions to sell their shares and how the money received from selling those is to be distributed. Just like with transfers, expect there to be specific applications and requirements in selling a deceased person’s shares that you would need to fulfil.

As the Executor, you might be asked to fill out a ‘Deceased Estate Trade Form’, which identifies the Executor, the shares that need to be sold and any fees to be charged during the sale.

If shares are sold, the Executor or Administrator must find out which broker was used to buy the shares and make an application to sell them with the associated fees (e.g. CommSec, CMC Markets, IG, Selfwealth etc.).

3.3 What if There Is No Will?

If the shareholder died intestate or without a Will, there could be legal consequences or complications – whether you’ll be transferring or selling the Deceased Estate’s shares.

Before any assets can be distributed or for Estate Administration to take place, an eligible person needs to apply for the Letters of Administration with the relevant Supreme Court. People who can apply for these Letters of Administration include the deceased person’s spouse, close relative or de facto partner.

Once the Letters of Administration are granted, the person is then tasked to become the Administrator of the Estate. They are responsible for tasks to be undertaken similar to the work of an Executor.

The Administrator takes care of funeral arrangements, collects and records assets and pays off any liabilities or debts. When it comes to the distribution of shares held by the deceased, applicable legislation (based on the state) is used to determine how the Estate is distributed.

Shares could also be transferred or sold – similar to when there is a Will. Of course, the same application requirements and documentation also apply whether you are transferring or selling shares from a Deceased Estate – except that these tasks are being done by an Administrator and not an Executor.

4. What Happens When a Sole Director/Shareholder Dies?

Small to medium sized enterprises (SMEs) using the sole director/shareholder company model enjoy the convenience and simplicity of such a framework in running a business. But what happens if the sole director/shareholder dies? Can the business continue functioning with no one around to run it?

In such cases, Executors turn to the company’s constitution and Corporations Act 2001 (Cth) (the Corporations Act, or CA 2001), which states the laws concerning business entities in Australia. As mentioned in Section 201F(2), if a company’s sole director and shareholder dies, the deceased person’s personal representative is allowed to appoint another person as a director of the company to continue business operations unless otherwise specified in the company’s constitution.

In such cases, the so-called ‘personal representative’ is actually the Executor, Administrator or Trustee of the deceased person’s Estate. With a Will in place, the Executor can appoint an interim director to run the business temporarily while waiting for the Grant of Probate. Once Probate is granted, the beneficiaries can take full control of the company.

But if there is no Will, the person who receives the Letters of Administration from the state Supreme Court will act as the Administrator of the Estate. But since applying for and being granted the Letters of Administration could take weeks, the delay can lead to complications for the business in the interim. In any case, the Administrator is responsible for administering the Estate once they receive the Letters of Administration and will manage the transfer or sale of shares.

5. What Happens to Jointly Held Shares?

Shares that are held jointly or are co-owned usually pass automatically to the surviving co-owner. This means that the shares will not form part of the Deceased Estate. But again, this depends on state legislation concerning jointly owned assets, so it is best to seek legal advice if you are faced with this dilemma.

6. What Are the Common Documentation Requirements?

In selling or transferring shares from a Deceased Estate, the following documents are usually required:

  • Death Certificate: This document serves as proof of the investor’s death, and it is required for stockbrokers and share registries.
  • Will or Will Extract and Probate: For a small number of shares to be disposed or transferred and where Probate isn’t required, the broker might ask for a certified copy of the Will. But if the matter concerns significant shares requiring Grant of Probate, you will need to provide the broker a certified extract of the Will and the certified letter of Probate.
  • Letters of Administration: As mentioned, if the deceased died intestate or without a Will in place, Letters of Administration for the Estate are required for larger sums.
  • Small Estate Indemnity: Determined on a case-by-case basis, the general guidelines are specified by share registries with shareholding thresholds varying between $15,000 and $25,000. This needs to be completed if there is no Probate in place.
  • Intestacy Request and Indemnity: Estate Administrators may be required to fill out an Intestacy Request and Indemnity form with the share registry and/or broker if there is no Will and Letters of Administration is deemed unnecessary.
  • Executor’s Identification: Whether you are an Executor or Administrator, you will be required to provide proof of your identity, usually totalling 100 points.
  • Deceased Holder’s Identity Form: The Executor or Administrator will need to accomplish this form if the shareholder’s share registration details and legal documentation don’t match completely.
  • Section 1071B Statement: If the Grant of Probate or Letters of Administration are issued in an Australian state or territory different from where the shares are registered, this form is required to be completed and submitted.

7. Conclusion

So, whether you are transferring or selling Telstra shares of a Deceased Estate or stocks of any other company, make sure you discuss your situation and prepare the relevant documents needed. There may also be additional requirements you would need to provide depending on which state you’ll be working with in the process of Estate Administration.

Administering an Estate is a time-consuming, complicated affair, and if there are shares included with the Estate assets, it helps to know what’s required of you in your role as Executor or Administrator.

If you need more assistance with Estate Administration, you can always refer to simplyEstate’s checklists and tools or book a phone appointment to discuss your situation to ensure you perform your role efficiently.