Must Mutual Fund of Decedents Be Renamed to an Estate Before Passing to a Beneficiary?
Whether a mutual fund owned by a deceased person must pass to the estate prior to distribution to beneficiaries depends on how the ownership is titled and whether the decedent made provisions to transfer the assets upon death. If titled simply in the decedent's name with no transfer, it must be renamed as "the estate of ..." as an estate asset before passing to beneficiaries.
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Estate
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After the executor is appointed by the probate court, he must submit an inventory of all the assets titled solely in the decedent's name. This includes all real estate and personal property, including any mutual funds. If funds are held in an individual retirement account, the account owner usually names a beneficiary and the IRA does not pass through probate. The executor must send a copy of the letters testamentary issued by the probate court for estate adminstration and certified copy of the death certificate to have mutual funds solely owned by the decedent retitled in the name of the estate.
Joint Tenancy with Right of Survivorship
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If the mutual fund is titled as a joint accout with right of survivorship, the assets pass to the surviving account holders and do not go through probate. This is a common form of mutual fund ownership for spouses. The surviving owner(s) should contact the fund administrator and provide a certified copy of the death certificate to have the account retitled appropriately.
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Transferable on Death
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If the decedent included a transfer on death provision to designate beneficiaries for the mutual fund accounts, the assets are not part of probate and pass directly to the named beneficiaries. Transfer on death provisions supersede a will, so that even if the will names a specific beneficiary to receive these assets, the beneficiary whose name is on the fund's transfer on death form is legally entitled to the account. The beneficiary should contact the fund administrator and send in necessary paperwork, including a certified copy of the death certificate and personal identification.
Estate Settlement
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Before estate settlement, the executor or personal representative must pay all of the decedent's and estate's debts out of estate assets, as well as filing the decedent's final tax return and any required federal or state estate tax returns, paying any taxes owed. Once all debts are paid, the executor submits a final accounting to the probate court, detailing all of the income, expenditures and remaining assets. When the court approves the final accounting, the executor then passes remaining assets, including mutual funds, to designated beneficiaries.
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