Brokerage Account Frozen Upon Death

Fred and Wilma had $30,000 invested with an investment advisor.  When Fred died, Wilma tried to get the money.  But she couldn’t.

That’s because in Louisiana, if one spouse dies, then the assets in the investment account are usually frozen until a succession is done.

But that law recently changed.  Now, when one spouse dies, the other spouse has the right to withdraw half of the value of the investment account even before a succession is started.  So, thanks to this new law, Wilma will be able to get $15,000 out of the account right away.

Or so you would think.  But this law doesn’t apply to all joint investment accounts.  In fact, it applies to very few investment accounts at all.

This law only applies if 3 conditions are met.  First, the account must be titled in the names of both the husband and wife.  Second, the account must be registered as a community property account.  And third, the account must require that nothing in the account can be bought or sold unless both spouses sign off.  And it’s this third requirement that’s the problem: almost no joint investment accounts require both spouses to act in order to make a transaction.  Almost every investment account allows for a purchase or a sale by either spouse, not both spouses.

So, you would think that if the account allowed either spouse, acting alone, to make a transaction, then the surviving spouse ought to be able to get the money acting alone.  And you would be right if both spouses were alive.  But once one spouse dies, investment accounts are usually frozen.

And to make things even more complicated, at the same time they wrote this new investment account law, they also wrote a new law that deals with bank accounts.  And the bank account is totally different than the investment account law.

Let’s say that Fred and Wilma had $10,000 in a bank account.  But only Fred’s name is on the account.  Fred dies.  Can Wilma get the money out of the account once Fred has died?  Remember, the account was in Fred’s name only.  This new bank account law says that Wilma can get the money.  That’s because the new law says that when one spouse dies, the surviving spouse can withdraw up to $20,000 from the deceased spouse’s account.  Even if the account is only in the name of the deceased spouse.  No court order needed.


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