Not sure about this "transfer on death". Even so, the person whom you have transferred the positions should also know how to close those positions. For people totally alien to trading, it could be a daunting task. Shortie posted earlier that broker will liquidate all existing positions and go to cash upon confirmation of death. I think this is the best that we can expect. I hope this is what will happen. However, Shortie later corrected that broker will only cancel existing orders. This obviously does not solve the problem. If the accounts only has stocks or some small financial futures position, it might still be OK to let the position stay in the account or wait for them to expire. BUT, what if those futures position are very big or even some commodities futures which might result in delivery etc?? I guess those positions will be liquidated if margin call is not met but by that time, the account could be close to wiping out? Hoping to get further clarifications.
Educating your wide to liquidate the account and go to cash is an option but still not a perfect solution. Not far fetch to think wife can go at the same time as husband like in car crash. Also, death might happen much much later that wife also "forgot" the whole process of what to do. I know my wife will find it very "challenging." Some positions might be very complicated that wife might not know how to close e.g some options positions? I do not like to put resting stop orders because an event like flash crash will wipe out the account even when you are alive! Stop limit orders are still OK. Not all types of exposures can be protected by stop orders.
I believe having a joint account w/ wros should solve this problem. upon death the spouse just calls the order desk to close out all positions. and then goes on to enjoy life at your expense. "Joint Tenants With Rights Of Survivorship (WROS) Account type where each account owner has an equal and undivided interest in the cash and securities in the account. Upon the death or declaration of incompetency of any account owners, account ownership passes to the survivor(s). Most married couples and domestic partners with co-mingled capital should choose this account type."
I am a broker-dealer clerk. When we are notified that you have died, we freeze your accounts. All open orders are cancelled. We will not take any new orders or money movement instructions until your estate's executor contacts us with proper documentation. What does NOT happen: we do NOT close out or liquidate your positions. We do NOT have the authority to do that. Well, we do when your account invokes a margin call... What can you do about it? Find someone competent to wind up your affairs after you die, and give them the authority to do so, and give your broker instructions to deliver your account positions to them upon your death. In your state, probate may be a quick and painless process. Alternatively, you may be able to structure your estate to qualify for some sort of abbreviated & expedited process in lieu of probate. If neither apply to you, or you don't want to bank on either applying to you some many years down the road (people move, peoples' means change), use the inexpensive trust form. All your retirement accounts can be made payable (on your brokers Beneficiary Designation Form) to trusts for the benefit of your intended beneficiaries. The trust would be controlled - not by the beneficiaries - but by trustees designated by you, that you have determined to be capable and competent to wind up your affairs by liquidating all positions, hedging all other positions that can't be quickly/efficiently liquidated, etc. All your non-retirement accounts should already be in trust or llc form with you as trustee/manager, having already designated successor trustees/managers to wind up your affairs upon your death. In these cases, your designee would have control of your account as soon as they can get a copy of your death certificate. Don't take my word for it - I'm just a broker-dealer clerk. Call YOUR BD/FCM and ask them what their policies & procedures are. Good luck, and kudos for planning for the inevitable.