Photo by Gades Photography on Unsplash Gades Photography
Published by Robert W. Huntley, CFP®, CHFC®
A friend of my daughter recently had an interesting experience. Her friend’s grandmother had recently passed away and the family was going through the process of cleaning out her home and a bunch of boxes from her attic. One of the boxes contained some paperwork related to Apple shares dating back to the 1970’s.
A little research soon confirmed that grandma had indeed acquired some shares in the company decades before and those shares were worth about $500,000 today.
Think about how easily those shares might have been lost or thrown out with the trash.
That’s a happy ending. I wonder how often the ending is not happy. The ironic thing is that those boxes could be thrown out and no-one would ever even know they had been lost. People simply lost track of important holdings due to poor record keeping.
Several times over the years I’ve met people who were in the process of becoming clients of our firm. They had stock certificates stashed in their safe deposit box or file cabinet at home. In some cases, this was more than $1,000,000 worth of shares held in certificate form.
The most complex situation I personally encountered was a mom and dad who were holding original shares of about 30 companies but not just their own, also for each of their three adult children. The stock had been passed to them from deceased grandparents and this couple was keeping track of all four groups of shares. Every time there was a stock split, dividend, corporate name change, you name it, this couple was updating records and filing paperwork. It was a full-time job.
Holding shares of stock in certificate form presents several problems;
First, the risk of fire, theft or misplacing them. They can be replaced, but not easily and not everyone knows they exist to even ask.
Second, often stocks experience splits so the original certificates are outdated. it’s common for individual investors to just keep the original certificates and not know how many current shares they actually own or what the total worth is. This also makes keeping track of your tax cost basis difficult.
Third, dividends come in in multiple checks for each stock holding. The reporting on taxes is more complex.
So, what is the solution?
Reregister the shares into a brokerage account.
By doing so, you no longer have to keep track of the certificates. Share splits and name changes are automatically kept up to date. Dividends can easily be accumulated in cash in the brokerage account or paid directly through to you. At year-end you receive a single 1099 for all the dividend income. Finally, most brokerage companies will keep track of your cost basis as long as you provide them with a starting point.
Little steps like this are tangible ways to “Make the Complex Simple”. By getting your financial house in order and simplifying things wherever possible, you will see an improved quality of life.
Don’t get me wrong; it would be really cool to find out you have an extra $500,000 laying around in a dusty box somewhere. However, it would be bad to realize shares existed at some point and are nowhere to be found.
If you’re fortunate enough to receive a windfall, here’s some advice on getting it right the first time when you make or inherit your first million: