September 27, 2018. By Jennifer Wolfsberg:
Each year there are millions of dollars lost or abandoned as families have undiscovered assets, have lost track of gifted or inherited assets, or have given up on the idea that they can redeem such assets for cash value due to the arduous operational hoops of insurance companies, treasury systems, and transfer agents. The assets most susceptible to abandonment are savings bonds, physical stock certificates, and inherited or gifted insurance policies or securities. Organization, consolidation, and communication with family members is key to keeping track of these assets. When appropriate, liquidating some of these smaller external investments may also help streamline efficiencies and will make life much easier for your beneficiaries and heirs.
US Savings Bonds: While these come in many forms and series, this form of security can range from gifted paper bonds or bills received as a child to those who purchased bonds directly from the Treasury digitally. Prior to the expansion of investment account services through the introduction of wire houses and custodians, many individuals purchased and maintained their bond holdings directly with the Treasury. In these cases, the investor receives statements or has online access to Treasury Direct. Over the course of many years savings bonds ultimately reach maturity. Investors maintaining physical bonds will need to submit the paper security to redeem and receive the cash proceeds. Unfortunately, especially in the case of inherited bonds, this is not easily done due to the oftentimes onerous filing requirements.
Israel Bonds: Israel bonds are often purchased as gifts in recognition of a celebration but also in support of Israel. This section is simply referencing those bonds gifted and purchased in smaller increments. Like that of US Treasury instructions, investors have either held them at home or in their local bank safety deposit box. These can be redeemed directly at IsraelBonds.com, and some custodians will allow you to deposit these securities to an existing investment account. The custodian will then facilitate the communications and redemption process with the organization directly so that their respective operations teams may process transfers. This is not always the case, however, and a detailed review of the type of bond will be necessary. These structures are often best held to maturity as the market is much smaller in nature for liquidity. If you are holding physical bonds that may have already matured, or simply still hold physical securities, establishing an account directly with the organization to transition the format of the investment from paper to book entry will ease long-term management. It is critical to ensure that the registration and titling of the account ownership is updated, a step often missed if a child owner is now no longer a minor.
Transfer Agents and Stock Certificates
Physical Stock Certificates: Depending on your age, you may remember seeing actual paper stock certificates. These were issued by transfer agents such as Computershare or BNY Mellon and investors held them in safekeeping at home or in their safety deposit box. It was also quite common to gift shares of stock to a loved one in honor of a special life event. The Disney stock certificate was always a favorite for children’s gifts given its colorful artwork on the certificate and the fun-loving characters:
Over the years, however, with the advancement of technology and book-entry record keeping, the transfer agents slowly eliminated the option to use physical stock certificates. Outstanding shares in certificate form would be honored when presented to the agent for deposit, then converted to book-entry and left on file with the agent. Going forward, shareholders would receive paper statements summarizing their ownership. Over time they eventually introduced online access to allow for holders to view their shares, dividend checks, or the accounting details of their dividend reinvestment program.
What happens when you lose a certificate, or you are holding a physical certificate in title of someone such as a parent who has passed away? The transfer agent will still have a record of all outstanding shares with the serial number of your certificate. The difficulty lays now in the fact that a lost certificate, even if registered under the correct ownership, will require documentation for proof of loss (such as a death certificate) and an affidavit of loss. Additionally, a certificate replacement fee will be assessed. For certificates requiring complex registration changes due to the death of the asset owner, or using an estate or trust for example, the documentation is more extensive as you will need additional items such as court appointments and other estate documents.
Shares Held at the Transfer Agent: While shares held in book-entry form are far easier to navigate for operational support, these too have drawbacks for planning. When the ownership registration of the stock needs to be changed to align with your personal estate plan, or to administer the estate of a loved one, you will need to work with their client service department to make any necessary changes. You will not, however, have an individual representative assigned to you to maintain a continuous flow of information and support therefore it is key for you to maintain detailed notes. The transfer agent will require their own internal forms for your completion as well as copies of identifications and estate related forms for proof. While this is understandable, these are often mishandled in delivery, and not received to the correct department. Regardless of your attempt to find the right address, information is often missing upon arrival as the perspective of each representative processing the request can differ greatly. In our industry, these are often called NIGOs (not in good order) and you end up in this never-ending loop of communications with internal representatives who do not provide extension numbers or direct contact information.
Whole-Life Policies: Prior to the expansion of the insurance industry, products, and policy structures offered, many families purchased small policies ($5,000-$15,000) for their children and loved ones. Many of these policies were whole-life and therefore have a cash value unlike term products. After many years of ownership, they are often “paid-up” in full without premium payments due and provide an annual dividend that is credited to the policy. Since many of these policies can often be over 20 or 30 years old, statements received may be infrequent. Due to the infrequency of communication, tracking of these policies often goes by the wayside, yet this is indeed real money that should not be ignored. Policies can be held in force until the passing of the insured or cashed in for the proceeds. If you intend to hold the policy in force, it is important to ensure your family is aware of the policy’s existence. They will need access to a recent statement for a policy number to reference, and ideally the original policy, although you may request a copy from the insurance company for your records. It is also extremely important that the correct primary beneficiary listed on the policy is updated as this is how the insurance company will direct funds upon the insured’s passing, regardless of any other directives you may have in place externally.
We realize that navigating through the complexity of each company or agency’s operational requirements is exasperating, and it is easier to push this task to the back-burner, especially after several attempts at resolution. Frustration during the process occurs for many reasons, mainly being 1) the terminology used with these companies can be confusing if you are not an attorney or in the finance industry, making the phone calls simply exhausting, and 2) clients only have so much time in their day, and sitting on hold in a never-ending phone tree or talking with a new 800 number representative repeating the same story can feel less than productive.
The reality, however, is that over time your financial planning needs compound and become more involved. You may begin to manage not just your own finances, but also your children’s and likely your parent’s as well. We recommend consolidating, organizing, and when appropriate, liquidating these smaller external investment instruments to streamline efficiencies. Over the long term this will be important to the overall management of your personal or family finances. As people pass and assets remain in the title of the deceased, the filing requirements and documentation that these companies require are extensive. In many cases, even when the asset owner is living, dealing with these items can be grueling.
Please do not hesitate to call us with any questions should this resonate with your family or extended family’s financial planning.