How To Sell or Transfer Shares for a Deceased Estate - Sell My Shares

How To Sell or Transfer Shares for a Deceased Estate

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How To Sell or Transfer Shares for a Deceased Estate

Estate administration can be a complex and overwhelming process but dealing with shares owned by the deceased doesn’t need to be.

With a few tips and some knowledge of the key requirements and systems, selling or transferring Australian listed shares can be reasonably straightforward.

A good place to start is to gain an understanding of:

  • The different systems in Australia for holding shares
  • Stockbrokers and their role in the process
  • The required documentation for selling or transferring shares.

Holding Australian Shares

An investor can hold listed Australian shares under a CHESS (Broker) Sponsored or Issuer Sponsored system.

  • CHESS (Broker) Sponsored – This is where a broker registers the investor on CHESS (Clearing House Sub Register System) which is a system managed by the ASX (Australian Securities Exchange). A unique Holders Identification Number (HIN) is issued to the investor and provides a link between them and the broker. All transactions between the investor and that specific broker are recorded against the HIN.
  • Issuer Sponsored – Under this system, the investor has a relationship with each of the companies they hold shares in and they are given a Shareholder Registry Number (SRN) that links them to each specific holding. The details of the investor holdings will be recorded on an electronic register maintained by a share registry.

Each of the above scenarios presents different challenges and processes for selling or transferring Australian-listed shares as part of a deceased estate.

Transferring or Selling Shares

To transfer or sell shares, an ASX participant stockbroker will need to be engaged to facilitate the transaction.

For Issuer Sponsored shares any broker should be able to deal with the transfer or sale of shares, provided they have the SRN number. Since investors receive a SRN statement when they purchase the shares and this number usually doesn’t change, issuer sponsored holdings for deceased estates generally can be dealt with easily. 

In the situation of CHESS (Broker) Sponsored shares, the HIN provides for an exclusive relationship between the investor and a specific broker.

If the investor dealt with multiple brokers under this system, they may have more than one HIN, which can be problematic when administering an estate.

Even if the investor only dealt with one broker, an executor may wish to use a different broker whether it’s for cost considerations or a wish to appoint a specialist broker.

In this case, the executor(s) can make a request to release the holdings to an SRN. ASX rules specify that any remaining shares be automatically released three months after the notification of Probate.

Alternatively, an Off Market Transfer of the shares can take place, where the chosen broker transfers the HIN account to their system.

Key documentation is required to carry out any of the above transactions and to remove any holding locks on accounts. The type of documents may differ slightly depending on each specific situation.

Key Documentation

Broker Holding Statement (HIN) – for CHESS (broker) sponsored shares you will need to provide an up-to-date HIN holding statement or statements if the deceased dealt with more than one broker. This statement will include the HIN number, the names of the shares, the number of shares in each company and the current valuation.

SRN Statements – for Issuer Sponsored shares you will need to provide a recent copy of each SRN statement. The statement will include the SRN number, the company the shares are held in, the number of shares, and the investors’ registration details and address. A separate SRN statement with the shareholder’s unique reference number will be required for each shareholding.

Death Certificate – stockbrokers and share registries will require this as evidence of the investor’s death.

Will or Will Extract and Probate (if required) – if probate isn’t required to dispose or transfer assets, the broker will usually request a certified copy of the Will. In the case of probate, you will need to provide a certified extract of the Will and the certified letter of Probate to the broker.

Letters of Administration – if the deceased dies without a Will in place, or there is no executor appointed, Letters of Administration appointing a representative for the estate will be needed.

Registrars Certificate of Disclosure (SA only) – In South Australia, if probate is granted after July 1st 1987, a certified copy of the registrar’s Certificate of Disclosure to the Supreme Court of South Australia must also be provided to the broker or share registry to enable shares to be sold or transferred.

Small Estate Indemnity – in situations where an estate’s shareholdings are small, probate may not be required to sell or transfer the shares. Whether an estate qualifies for a small estate indemnity is determined on a case-by-case basis. General guidelines are specified by share registries with shareholding thresholds varying between $15,000 and $25,000. Usually each broker and registry has a Small Estate Indemnity form that will need to be completed if there is no probate in place.

Intestacy Request & Indemnity – if there is no will in place and probate isn’t required, the estate administrators will be required to fill out an Intestacy Request and Indemnity form with the share registry and/or broker.

Executors Identification – an executor or administrator will need to provide proof of their identity, usually totalling 100 points.

Deceased Holders Identity Form – if the shareholder’s share registration details and details on legal documentation don’t fully match, a Deceased Holders Identity Form will need to be completed by the executors or administrators.

Section 1071B Statement – this form is required if the probate or Letters of Administration have been granted in an Australian State or Territory other than where the shares are registered.

The Process of Selling Shares

Generally the process of selling shares as part of a deceased estate includes the following steps:

  1. Initial Notification of Death to Registry or Broker – as soon as practical share registries (if Issuer sponsored), stockbrokers (if CHESS or broker sponsored), and Margin Lenders (if applicable) should be advised of the death and given a certified copy of the Death Certificate.
  2. Notification of Probate or Letters of Administration – in situations where probate is sought and granted, a certified copy of probate should be provided to stockbrokers (if CHESS or broker sponsored). Where there is no Will in place, the Letters of Administration should be given to the stockbroker as well.
  3. Selling the Shares – the actual process for selling the shares will differ depending on whether the shares are Issuer Sponsored or CHESS (broker sponsored).

Issuer Sponsored (SRN)

  1. Appoint a broker/advisor
  2. Provide the following documentation to the broker:
    1. SRN statements of holdings
    2. Certified copies of the following:
      • Death Certificate
      • Probate and Will extract or Letters of Administration or Small Estate Indemnity and Will or Intestacy Request and Indemnity.
    3. If probate granted in South Australia – Certified copy of Registrars Certificate of Disclosure
    4. Certified Identification of Executors or Administrators
    5. If the name does not match – Deceased Holders Identity Form.
    6. The broker will arrange sale instructions/forms with the executors/administrators.

CHESS Sponsored (Broker Sponsored HIN)

If using sponsoring broker:

  1. Instruct the broker what to sell
  2. Provide the following documentation to the broker:
  1. Certified copies of one the following:
    • Death Certificate
    • Probate and Will extract or Letters of Administration or Small Estate Indemnity and Will or Intestacy Request and Indemnity.
  2. If probate granted in South Australia – Certified copy of Registrars Certificate of Disclosure
  3. Certified Identification of Executors or Administrators
  4. If the name does not match – Deceased Holders Identity Form.
  5. The broker will arrange with the executors/administrators sale instructions/forms.

If appointing a different broker/advisor, your chosen broker/advisor will either:

  • Complete a request to convert holdings to SRN OR
  • Complete Off Market Transfer Forms.

Then follow the remaining steps above.

The Process of Transferring Shares

The same documentation detailed above for selling shares is required for transmitting or transferring shares from the estate but you may also need to provide additional documents including:

  • A Section 1071B statement (one per company holding) if the shares are registered in a different state to where probate is granted
  • Original copies of Off Market Transfer forms (one per company holding) which need to be completed by the Executors.

All of the documentation must also be provided to each of the companies’ share registries (for issuer sponsored shares) and the sponsoring broker (for broker sponsored shares).

Joint Name Shareholdings

If shares are jointly held, the shares pass on to the surviving holder but this process occurs outside of the actual administration of the estate. Joint name shareholdings only form part of an estate when both joint holders are deceased.

For joint name shareholdings to be transferred documentation will need to be provided to support the process.

CHESS or Broker Sponsored Holdings (HIN)

A certified copy of the Death Certificate will need to be provided to the sponsoring broker. The sponsored broker arrangement remains in place following the transfer, unless requests are made to transfer to another broker or to release to Issuer Sponsored (SRN) holdings.

Issuer Sponsored Holdings (SRN)

In addition to a certified copy of the Death Certificate for Issuer Sponsored Holdings (SRN) you will also need to provide the following documents:

  • Request to Register Surviving Holder Form
  • Deceased Holders Identity Form – if there is any name discrepancies between the share registry records and death certificate
  • Shareholding statements.

Once all of the documentation has been lodged, assuming it meets all specified requirements, the holdings will be registered in the surviving holder’s name and they will receive new holding statements.

Margin Lending Accounts

Transferring or selling shares can be more challenging if there are Margin Lending broking accounts involved. The lender will have some control over the shares.

The transaction process is straightforward when there are no outstanding loan balances on the margin lending facility. In this case, a standard Deceased Estate Instruction form is usually all that’s needed to lift any holding lock on the shares.

When there is an outstanding balance the loan must be settled first. Lenders usually offer a few options for clearing the balance including:

  • Paying the outstanding cash balance amount. The holding lock is lifted so a linked broker can carry out further transactions, or you can start the process of transferring to SRN so you can appoint any broker.
  • Releasing the holding lock to enable enough shares to be sold to clear the loan. Only the linked broker can facilitate this sale.

Sell all shares in the account. Again, only the linked broker can facilitate this sale.

Taxation

Selling or transferring shares may also have taxation implications you should be aware of.

In cases where shares were acquired before September 20th 1985, there is no capital gains tax on the sale amount. For shares acquired after that date the shares sold by the estate will be handled as part of the estate’s taxation finalisation and will be subject to capital gains tax.

If shares are transferred to beneficiaries of a deceased estate capital gains tax doesn’t apply until a point in time when the shares are sold. Where those shares were acquired after September 20th 1985, the cost base will carry over from the estate’s original purchase cost.

In scenarios where the shares were acquired by the estate prior to September 20th 1985, the cost base resets to the share price on the day the deceased died.

Depending on the situation, there may be some tax efficiencies that can be achieved by not selling all of the shares in the estate.

Transferring shares to a beneficiary with a marginal tax rate less than the estate may reduce the overall payable tax amount when it comes to selling them.  

It is important though to understand that each and every individual’s situation, Will and estate is unique, requiring advice from qualified tax and legal professionals.

That being said, with the above information you should find it a little easier to navigate the process of selling or transferring shares for a deceased estate.

This guide was brought to you by Jason Davis from sellmyshares.com.au.