Monday, June 05, 2006

Medallion Guarantee of Stock Certificates - A Good Thing, But to be Avoided

Category: Estate Planning, Probate and Estate Administration

Have any stock certificates? Real ones, on the fancy, colorful paper? If so, at some point you, or your Personal Representative (Power of Attorney, Executor, Trustee, etc.) will need to deal with having those stock certificates "Medallion Guaranteed" in order to sell or transfer them.

According the Securities and Exchange Commission article “Signature Guarantees: Preventing the Unauthorized Transfer of Securities":

If you hold securities in physical certificate form and want to transfer or
sell them, you will need to sign the certificates or securities powers. You
will probably need to get your signature "guaranteed" before a transfer agent
will accept the transaction. Although it's an inconvenience to get your
signature guaranteed (emphasis added) the process protects you by making it
harder for people to take your money by forging your signature on your
securities certificates or related documents. Transfer agents insist on
signature guarantees because they limit their liability and losses if a
signature turns out to be forged. One way to avoid having to get your signature
guaranteed is to have your securities held in street name, meaning that your
securities are held in the name of your brokerage firm instead of your name
(emphasis added).

An investor can obtain a signature guarantee from a financial institution –
such as a commercial bank, savings bank, credit union, or broker dealer – that
participates in one of the Medallion signature guarantee programs.

A Medallion imprint or stamp indicates that the financial institution is a
member of a Medallion signature guarantee program and is an acceptable signature
guarantor. By participating in the program, financial institutions can guarantee
customer signatures with the assurance that their guarantees will be immediately
accepted for processing by transfer agents.

Transfer agents can refuse to accept a signature guarantee from an
institution that does not participate in the Medallion program or that is not
recognized by the transfer agent. While guarantor firms can charge a fee for
their services, they often don't and offer them as part of their customer

While getting stock certificates Medallion Guaranteed may not be impossible, it is a hassle (the SEC actually calls it an “inconvenience” in the article) – especially when you are not the owner, but the owner’s fiduciary (executor, trustee, attorney-in-fact, etc.). More importantly, it is a hassle that can be very easily avoided by taking all your stock certificates to a broker and turning them over into a brokerage account. The discount broker fees are very small. You are not giving up any control. You are gaining a huge amount of convenience (to buy and sell yourself without getting a Medallion Guarantee) as well as giving a “gift” to your fiduciary by making your estate infinitely easier to manage. Also, if there is a fire or other disaster, your brokerage accounts won’t disappear, but your stock certificates might. If you aren’t here to have them re-issued, those assets may never pass to your family.

Thursday, June 01, 2006

Estate Planning Throughout Your Life - A Series of Articles

Category: Estate Planning

From The Motley Fool, a great quick series of articles about Estate Planning at any stage of your life, from young single adult to retirement.

Estate Planning Throughout Your Life [ Commentary] May 31, 2006: "This series of articles will address common estate-planning needs for the situations that typical people face during various stages of their lives. Although the topic is vast and complicated, with lots of traps for the unwary, these articles will give you the basic information you need to ask informed questions and to get appropriate assistance along the way.
To read all of the articles in the series, click below:

Estate Planning: Winding Down
At a certain point in life, things begin to get simpler again. Children grow and start out on their own. Thanks ...

Estate Planning: Bringing Up a Child
As any parent knows, caring for a child involves a huge amount of responsibility. Infants and toddlers need full ...

Estate Planning: Single and Starting Out
At first, the concept of estate planning for the young seems silly. You might ask, "Why do I need estate planning? ...

Estate Planning: Single and Getting Ahead
After a few years of earning money, you've done all the right things. Perhaps you've used the Fool's Credit Cards ...

Estate Planning: Retired and Comfortable
You've made it to the end of your working life, and now it's time to reap the benefits of all of your hard work. ...

Estate Planning: Two's Company
Getting your individual estate planning under control is a significant step on the path to financial security. ...