Your investments: What to do with stock certificates?

Because a stock or bond certificate could be quite valuable, they should be shown to a financial adviser who will do some research to determine their value.

By AARON KATSMAN
Shekel money bills (photo credit: REUTERS)
Shekel money bills
(photo credit: REUTERS)
Over the last two weeks four clients have contacted me saying they have found old stock certificates.
One was a neighbor who had been sorting through some papers after his mother’s death. After rummaging through countless boxes and drawers, he discovered that his mother had kept a safe-deposit box after her husband passed away. When the box was opened, the son found, among various items, three stock certificates. Having moved to Israel as a child, the man had no idea what they were or their worth.
After doing some research for him, we discovered these certificates were worth around $35,000.
In another example, a client came in with multiple certificates she found when she was moving apartments for shares of Johnson and Johnson, Philip Morris and Coca Cola. The certificates were issued on a US address she hadn’t lived in for more than 40 years. She never received dividend checks and didn’t even remember how she acquired the stocks. The value of her shares in these three stocks was substantial and when you throw in unclaimed dividends and corporate spin-offs, it was as if she had won the lottery.
What Are Stock Certificates? In some ways, they are a relic of the past. Years ago, when an investor would purchase shares in a company, he would receive an actual certificate testifying to his ownership.
Nowadays, shares are generally purchased through an investment account and a brokerage firm holds the shares for us.
When people either inherit, find or rediscover certificates, they often do not know what to do with them. Firstly and most importantly, do not throw these certificates away as often happens when people don’t realize their significance.
Because a stock or bond certificate could be quite valuable, they should be shown to a financial adviser who will do some research to determine their value. While it may indeed emerge that the certificate is worthless because the company went bankrupt, this may be the exception rather than the norm.
Even if the company went bankrupt, there are times when, for some reason, there is demand for the actual certificate, which then still can be worth some money. Normally, there is some value to be recovered. I once had a client who brought me a certificate from AT&T, the phone company, and after searching for uncashed dividends, stock splits and company spin-offs, he ended up with more than $350,000! When it comes to managing an investment portfolio, many individuals like to do it themselves. However, when it comes to finding out how much money could be claimed from a stock certificate, I strongly urge contacting a professional. Many times, it becomes necessary to run a search on unclaimed properties or re-register shares if the certificate was an inheritance.
Such tasks can be extremely difficult for the average individual to do him/herself, as many potential issues may arise. Financial advisers, on the other hand, do such searches on a regular basis in a timely and efficient manner and are aware of the various issues that may be involved.
It is advisable for people who still hold actual certificates to deposit them into an investment account. Rather than worrying about receiving small dividend checks and then trying to figure out how to cash them, the dividend will go directly into the account and automatically start earning interest. In addition, in the case of a stock split or spin-off, everything is taken care of in the account and there is no need to get new updated certificates or deal with complicated paperwork.
For older investors, you will be doing your potential inheritors a big favor by parking the shares in a brokerage account. It is very messy and time consuming to have to deal with actual certificates during an inheritance. Simplify your estate planning and deposit those shares into an account.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.