Stock Will

In estate planning, a last will is a fundamental document that allows individuals to determine the distribution of their assets upon their demise. 

This legal instrument serves as a roadmap for the orderly transfer of assets to heirs. 

Within the spectrum of assets included in a will, stocks occupy a prominent position.

It often carries substantial financial implications. 

In this blog, we will delve into the intricate world of stock will.

Understanding Stock Will

Stock bequests involve allocating shares or ownership interests in publicly traded companies to specified individuals outlined in a person’s will. 

These legacies can encompass a range of stock types, including common shares, preferred shares, or stock options. 

Understanding that such bequests are subject to the legal framework governing wills is essential.

Legal Formalities

Drafting a will that includes stock bequests requires meticulous attention to legal formalities. 

A will must meet specific requirements in most jurisdictions to be considered valid. 

These typically include:

Testamentary Capacity: The testator (the person creating the will) must be of sound mind.

He must understand the nature and consequences of their actions when making stock bequests.

Witnesses: Many jurisdictions require wills to be signed by witnesses who can attest to the testator’s identity and competence.

Signature: The testator must sign the will; sometimes, it may need notarized.

Revocation: The testator may revoke the will at any time while they are of sound mind.

Specificity In Stock Will

One of the critical aspects of including stocks in a will is the need for precision and clarity. 

Vague or ambiguous language can lead to disputes and litigation among beneficiaries

Therefore, it is essential to specify the following details when bequeathing stocks:

Stock Type: Identify whether the bequest includes common shares, preferred shares, or other stock forms.

Quantity: Specify the number of shares or a percentage of ownership to be transferred.

Recipient: Name the beneficiary or beneficiaries who will inherit the stocks.

Contingencies: Address any contingencies or conditions under which the stock bequest should be executed. 

For example, specify whether the transfer depends on the beneficiary surviving the testator.

Stock Wills And Portfolio Management

Strategic stock bequests can play a role in estate planning for individuals with substantial stock holdings.

They allow for the preservation of specific investments within the family or charitable purposes. 

Such bequests can also help heirs and beneficiaries diversify their portfolios.

It potentially mitigates risks associated with concentrated stock holdings.

Example 1: The Equal Distribution Stock Will

Background Scenario:

John is a father of three children, Sarah, Michael, and Emily.

He has a significant stock portfolio that he wants to distribute equally among his children upon passing.

Stock Will:

“I, John Smith, being of sound mind and body, hereby declare this to be my Stock Will. Upon my death, I direct my executor to distribute my entire stock portfolio equally among my three children, Sarah Smith, Michael Smith, and Emily Smith, in the form of stocks, bonds, and other financial instruments as they see fit.”

In this example, John wants to ensure that his children receive an equal share of his stock portfolio.

The stock will specify this intention clearly, leaving it to the executor to determine the specific stocks and financial instruments to distribute equally.

Example 2: The Conditional Stock Will

Background Scenario:

Lisa is a successful entrepreneur who owns a tech company and a diverse portfolio of stocks.

She has one child, David, who is currently pursuing a career in music.

Lisa is concerned that David might not have the financial expertise to manage the stock portfolio effectively.

Stock Will:

“I, Lisa Johnson, hereby establish this Stock Will. Upon my demise, I direct my executor to distribute my entire stock portfolio to my son, David Johnson, with the following condition: If David has not completed a financial management course within three years of inheriting the stocks, he must hire a qualified financial advisor to manage the portfolio until he does so. Once he completes the course, he may choose to manage the portfolio himself or continue using the services of the financial advisor.”

In this example, Lisa is concerned about her son’s ability to handle the stock portfolio responsibly.

She sets a condition that requires him to undergo financial management training and hire a financial advisor if he fails to meet the deadline.

This conditional stock will aim to ensure responsible management of her assets even after her passing.