Shares held jointly by husband/wife - what happens when one passes away?

Say that a husband/wife has a joint brokerage account with one of the banks and they hold shares jointly and they do share trading through this brokerage account. What happens if one were to pass away? Can shares still be bought and sold as normal or does everything has to stop immediately?

Also what happens to the SMSF if they have a similar setup with a broker too and also do share trading through the SMSF?

 

Are the shares held as joint tenants or tenants in common?

If JT the survivor takes the shares directly. If TIC the deceased's interest in the shares pass via their will or the intestacy laws and probate or administration will need to be passed before any transfers take place.

It is generally not a good idea to hold shares jointly I think. Better to hold say 50% of the shares in the name A and 50% in the name B.

For a SMSF it will depend on who the trustee is.
If a company control of the company will pass - you need to plan for this by considering the ownership of the company shares, and terms of the trust.
If individuals then death of a trustee will also mean control will pass, usually to the deceased's legal personal representative initially.

A superfund is a trust so the shares won't pass via the will or the intestacy laws. But you could arrange for your death benefits to fall into your estate so the death benefits could then be dealt with via the will and into a superannuation proceeds trust etc

 

The SMSF is a matter separate to all personal assets. As I read the above post I understand the question is about broker trading accounts.

1. If the SMSF has human trustees the broker needs to change the trustee details. Each HIN will change and the legal title will need to change to reflect the death. Many registries will charge a fee and will require evidence of the trustee death. The change of ownership from two names to one (for example) is not a CGT event.
2. If the SMSF has a corporate trustee ASIC changes need to occur to remove the deceased and appoint the legal personal representative/s. The broker account likely will not be impacte beyond that of permitted authorised access.

This issue illustrates why a corporate trustee is best for a SMSF. On death it means the trustee remains ABC Pty Ltd and only the Directors will change.

The SMSF should seek advice from its fund administrator / accountants etc to ensure it follows all the correct processes. The fund may be required to pay a death benefit and consider if a reversionary pension is impacted.

 

When a brokerage account is initially set up by two individuals (husband/wife) I thought the account is automatically a joint account as I don't remember on the form any question asking to nominate a joint or TIC account. Is this not the case?

Any reasons as to why you think it's generally not a good idea to hold shares jointly? Wouldn't that make it easier to pass them on directly to the spouse on death and the brokerage account to continue as it and shares to continue being traded without any changes to the brokerage account or shares held?

 

Thanks Paul. Ours has a corporate trustee as that has always been recommended as the best setup.

 

Ring them up and ask. I have never held a joint brokerage account, but on bank accounts I dontn't recall being asked. You will need to consider the state legislation too. Default in NSW, if not otherwise specified is Joint tenants. May differ in other states.

An example of why joint could be not ideal.
X and Y jointly buy shares, shares double in value. they then buy a main residence and X has a baby and not working, Y on the top tax bracket. they want to sell some shares to debt recycle...

they can't just sell the shares owned by Y and any sale will increase Y's income and result in more tax payable.

but joint could be worth considering for estate planning for death.