I don't know if this is the correct Forum for this but: What happens when a private person with many positions passes away? There might be some very aggressive positions, ie, some naked Calls for example, and some move adversely against the deceased. What if there's a Margin Call after death? Does the Broker go after the Estate? I could imagine some real serious losses. I mean, I wouldn't think it would matter. The Estate notifies the Broker, submits a Death Certificate, and the Account is settled up and closed? It's just that I could imagine it could get real sticky.
What you are describing certainly happens sometimes. But in theory, it should not happen a lot, because the broker will liquidate the positions quickly if a margin call is not met. If the system works the way it is supposed to, the broker's losses, over time across a large pool of clients, should be relatively low. Yes, the broker can certainly pursue a claim against the estate for any losses. There are ways to avoid this sort of thing, e.g., you can give someone else access to the account. But that can get tricky depending on how you do it, and how the account is titled. A power of attorney ceases to have effect upon the death of the principal. A joint account between two brothers, or two unrelated inviduals, will often be frozen by the broker when they learn of the death. Or, if you are lucky, they might allow closing orders only. Similar issues can arise if someone becomes incapacitated. But that is a little easier to address with a durable power of attorney. To avoid the problem, you gotta have someone who knows how to exit your positions, and then you gotta give them full access before you die, and then you have to get them on board with the idea that if you die, they should quietly go into the account and do what needs to be done before the broker is notified of your death.
Who gets the Necksium stash? Anyway, anyone coherent and at risk (health, occupation, etc.) would sign a "trusted individual" rider on the account if able, or make it JTWROS. It's up to the individual to make sure some trusted contact can gain access to the account or contact the broker on their behalf. The individual with the POA would not legally be able to make the account flat after death but I can't imagine it's an issue in practice.
I've posted these same issues over they years. I get shouted down and am called an idiot. I can't let that worry me. If I die, my wife takes over...If she dies first, I take over (a trust). When the second dies (incapacitated), the bank's trust department takes over. Since I am not confident the bank's trust department to make quick and important decisions on our stock accounts, I just do covered calls. Yeah, I'll buy back a put...Just to clear a position. Others (on these boards) think I'm strange...IT'S CALLED ESTATE PLANNING!! GET USE TO IT PEOPLE... PS Just typing this, I see a hole in our estate...Schwab's US Treasures. We need to go out further and spread out more. Schwab makes bookoo (beaucoup) bucks from assets sitting on their Schwab checking accounts. It could take awhile for the trust department to be on top of moving the money into better positions (US Treasure/CD)...While the estate clears.
Once the death of a client is legally established, the beneficiary of the account takes control. All positions remain if no margin calls were issued. It is up to the beneficiary to manage the open position in the account. This happened to me with IB
So you died and your beneficiary took control of your account? I'm glad to hear that worked out for you.